Rhode Islanders for Tax Equity Defies the Fallacy of the Flight of the Lords

Rhode Islanders for Tax Equity held a recent press conference at the Rhode Island State House and brought attention to legislation that could mean $66 million in much needed revenue for the state. The March 12^th presser was organized by a number of labor organizations and social action groups and included the sponsors of both the House and Senate versions of the bill. Representative Maria Cimini spoke on behalf of the House side and Senator Juan Pichardo testified to the need for the bill to pass in the Senate.

The proposed legislation calls for a 2 percent increase in income taxes for the few Rhode Islanders earning $250,000 or more. The catch phrase “2 percent on the 2 percent” means the current top tier of taxation at 5.99 percent will increase to 7.99 percent and all revenue generated will go into the general revenue fund. This could generate up to $66 million in revenue and help relieve property and car tax pressure that weighs most heavily on Rhode Island’s struggling middle and lower income demographics.

Senate President, Teresa Paiva-Weed, decided to hold her own press conference at the exact same time as the RITE event and publicly denounced any support for raising taxes on even 2 percent of Rhode Island’s population. Paiva-Weed argues that the proposal is bad for business and believes that this will create a flight of the lords phenomenon. House Speaker, Gordon Fox, has been non-committal on the subject, but has historically shied away from the idea. Governor Chafee said he agrees with the concept of raising taxes on the rich at a national level, but not at a state level.

In spite of the rhetoric from the Governor and the General Assembly leadership, one must ask whether the logic of the tax breaks that were initially enacted in 2006 and only slightly modified in 2010 have done anything positive for Rhode Island’s economy. Prior to the 2006 reform, the tax rates for the top earners were 9.99 percent. In a measure to “simplify” the tax structure and make Rhode Island a more competitive place for business, the income tax structure was modified to its current form and … well … one can see the results.Rhode Islandis consistently competing for the highest levels of unemployment in the nation and boasts some of the highest property taxes in the northeast. The infrastructure is crumbling, the education system is poor in every definition of the word, and poverty is high. All of these things are causing an unprecedented population decrease. This is not a flight of the lords. This is a flight of everyone else.

But, for those in power, appeasement of those who earn more than $250,000 makes sense. After all, a person can cast only one vote. But a rich person can donate a lot of dollars, if given the right quid pro quo. The lords stay put. The leadership stays put and the rest of the lot can continue to complain about having no bread. Let them eat cake? Look what happened to Marie Antoinette. I’m just saying …

Rhode Island needs to upend its “lords and serfs” mentality. The job creators have had seven-plus years of this income tax rate and have not created jobs. Nor have they fled. So, the logical step is to try something new. And the something new proposed by Rhode Islanders for Tax Equity is very reminiscent of something old. Raise the taxes on the rich. They can afford it. Two percent on the 2 percent is far from an unreasonable request and necessary to offset the proposed cuts to corporate taxes and possible cuts or reductions to sales and entertainment taxes. Contrary to popular belief, Rhode Island doesn’t have a spending problem. It has a spending problem compared to having an enormous revenue problem. The state needs to spend on education, on infrastructure, on public services, on clean water, and on many other basic necessities that citizens take for granted until their car falls into a pothole the size of a Newport mansion on the way to bringing the kids to a school with no arts, sports, or music programs in a car taxed for more than its blue book value.

The 2 percent increase on 2 percent of the population is a simple remedy to alleviate the weight of part of this problem. It seems like a no brainer. At least it does to 98 percent of us.