Public-employee unions want higher taxes for obvious reasons: more money extracted from people’s pockets and given to the government, in their view, means more money for public jobs, salaries and benefits. And that means more money flowing into their coffers from dues.
Senate Finance Chairman William Conley, D-Providence, is carrying the unions’ water with a new proposal to jack up income tax rates.
Mr. Conley is proposing hiking the top tax rate in Rhode Island from 5.99% to 8.99% — a whopping 50% increase on those who dare to earn big money in the state.
Senator Conley said that would just affect the top 1% of earners, targeting those who make $475,000 a year or more. This has long been a popular strategy for sneaking in tax hikes. First hit a small group that can be demonized through class warfare as “the rich” who can “afford” to “contribute” more, and then later expand it to taxpayers earning far less.
Once the General Assembly busts through the 5.99% ceiling, the sky is the limit.
There are some obvious drawbacks with this approach.
One is that the state already has one of the worst business climates in America — the worst, according to CNBC. Making its uncompetitive tax and regulatory structure even worse would not help.
Rhode Island needs a more vibrant economy to produce the tax revenues required to fund its big and generous government. Weakening its economy would only hurt everyone in the long run by making it harder to fund that government.
Then there is the question of how much government is too much. Already, Rhode Island government is notoriously inefficient, and focused on dispensing favors to powerful special interests. (Note the gift to unions of evergreen contracts last year, despite dire warnings from local leaders that the measure will inflate local property taxes, already among the highest in America.)
Rhode Island has been growing its state government at an alarming pace — almost 33 percent since 2013. The 2020-21 budget is expected to soar past $10 billion for the first time.
Senator Conley’s proposal would, by his calculation, shift another $182.9 million from the private sector to the government.
There is also the question of whether it is in the state’s interest to brutalize its top earners (and top taxpayers). They tend to be hard workers who run companies, which contribute to the economy. The state would be better off having more of them instead of driving them away.
Indeed, we can’t afford to lose them. In 2015, just the top 3.5% of Rhode Island earners paid 43% of all the state’s income taxes, according to the Tax Foundation.
“Nobody’s moving because of this” new $182.9-million scheme, Senator Conley promised.
But the middle class has already been moving. The state lost $1.4 billion over 10 years because of a decline in income-tax filers, Watchdog RI reported last year. The loss of high-income earners to low-tax states such as Florida also hits the charities they leave behind.
Let us hope legislative leaders with greater economic sense — and a smidgen of fidelity to all the people, not just service to special interests — reject this bad idea.