March 29, 2010

Challenging Conventional Wisdom

By Teresa Tanzi
as published in the South County Independent and the Narragansett Times

Conventional wisdom around the state would have you believe that that there are no alternatives to drastic cuts to South Kingstown's schools and aid to cities and towns. If these difficult times require us to look at the entire state budget, as we are so often told, then everything should truly be on the table. One thing missing from these discussions are tax expenditures; the tax credits, exemptions, and deductions that reduce taxes for selected companies and individuals, thereby reducing state income. We often call them loopholes. Essentially, it is state spending through the tax code. Unlike direct spending, however, tax expenditures are written into the tax code and are not reviewed annually. In, 2008, The current estimated value of those expenditures was at least $1.3 billion dollars, approximately one-third of the value of the current state general fund.

No schools in South Kingstown should be closed as a result of potential funding shortfalls until the Governor is in compliance with State Law 44-48.1, which requires the release of the Tax Expenditure Report. This report, which was due on January 12th, documents the costs of the more than 200 tax breaks. We expect a net benefit to our state’s economy when we provide “incentives” to businesses and individuals, yet as far as we know, they have become nothing more than an annual gift to a few lucky corporations. Given this lack of accountability, a staggering budget deficit and great uncertainty throughout the state, now is not the time to allow a $1.3 billion dollar line item, one-sixth of the entire state budget, to go unscrutinized.

No cuts should be made until this billion-plus dollar question is answered. How could any responsible decisions, with dire long-term consequences for the community, be made without all the facts? How long can we as citizens accept this kind of blind leadership? It is time to “break the (tax) code of silence,” as the Poverty Institute puts it, and “determine whether every dollar spent through the tax code is achieving its intended policy goal in a cost effective way; reform or eliminate those tax expenditures that do not meet the ‘prove it or lose it’ test.”

For example, the 2008 Tax Expenditure Report shows a $1 million loss of revenue to Rhode Island from a sales tax exemption on aircraft and aircraft parts alone. Might the state be better off ending exemptions for airplanes and for some other industries? Do we need to forgo collecting taxes on investment companies’ toll free calls? I would tell you how much ending those gifts would provide in revenue, but we simply won’t know until the report is produced. It seems we could benefit greatly from the General Assembly using its options at this time instead of forcing the hand of our Town Council and School Committee, whose options are now limited to closing an elementary school while also raising property taxes. So much for all the talk in Providence of not raising our taxes.

I demand that the the Governor, the General Assembly and the State Treasurer hold the Department of Revenue accountable immediately, and  produce the report so that decisions can be made with all the facts on the table. As taxpayers being forced to reevaluate our communities priorities in the midst of a fiscal crisis, I demand a clear answer from the General Assembly and Governor, and I certainly hope you do the same- BEFORE we close schools, end full day kindergarten, or halt other essential services that are the fabric of our community.