PROVIDENCE – Rhode Island House Rep. David Place, a Republican representing Burrillville and Glocester, and state Sen. Sam Bell, a Democrat representing Providence, have teamed up to renew their efforts to limit what they say are costly corporate giveaways used to lure companies from neighboring states. They have resubmitted legislation to enlist Rhode Island in an interstate compact that supporters say protects public investments now, and in the future.
A March 3 report by the Rhode Island Department of Revenue concluded that there are minor economic benefits deriving from the ReBuild RI tax credit, which the legislators say prompted their interest in defunding corporate incentive programs by the state.
“It is well-documented that corporate giveaways are among the least effective uses of taxpayer dollars to create and maintain jobs,” noted a release on the bills. “In recent studies, including research from the Mercatus Center at Georgetown University, it is estimated that only one out of eight subsidies influences a company’s decision as to where to locate, whether to expand, or whether to stay put.”
The release stated that the subsidies translate to wasteful spending of $95 billion each year in states and cities who spend their taxpayer funded resources on what’s touted as an economic development tool. Subsidies, it notes, must be funded by taxes – and higher taxes tend to discourage economic activity.
The legislators note that subsidies are generated by redirecting funds that would be spent on essential public services such as education, public safety and infrastructure.
“They also fuel business inequality as only the largest businesses receive the vast majority of these funds,” stated the release. “Place and Bell’s proposed legislation is viewed as a reasonable first step in the phase out of corporate giveaways, with an anti-poaching agreement among state governments that would prohibit state company-specific tax incentives and state company-specific grants as an inducement for entities to relocate existing facilities.”
The legislators note they added a fiscal year-end sunset in the bill to determine its efficacy, stating that Rhode Island would be a leader in the concept in the Northeast.
“Free market and progressive socialist thinkers realize that the current corporate giveaway incentive system benefits the elite and well-connected, not the everyday citizen,” said Place. “A better return on our economic development investments would be to use the incentive funds given away annually in Tax Increment Financing or through ReBuild RI and the RI Film Office, to provide broad based tax relief to our homegrown small businesses across the state.”
“Corporate welfare has a very poor track record,” said Bell. “When corporations get special handouts from our state government, our residents have to pay more in taxes to make up for these hidden tax breaks, subsidies, and loopholes. No one should be paying less in taxes or getting free money from the government just because of their political connections. Every business should be treated the same. It’s only fair. With a bipartisan agreement between the governors of Kansas and Missouri showing the way, it’s time to enact a national pact to end the practice of using corporate welfare to steal jobs from other states.”
In a joint statement, the legislators added, “Whether it is investing in our small businesses, or properly investing in our necessary core government services, our increasingly limited fiscal resources demand a fresh look at where taxpayer dollars are best spent. It has been estimated that by repealing these special tax breaks, it would save RI taxpayers millions over the years. We feel the corporate giveaway system is a good place to start in our bipartisan call for creating smart and thoughtful changes in how we do business in the Ocean State.”