Rhode Island: One Bad Idea After Another

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“Hello.  Bad Tax Ideas R Us.  How may I help you?”

“Well, good afternoon, Governor Carcieri.  Good to hear from you again.  What can I do for you?”

“You say you’re looking for a ‘game-changer’? Something that would ‘significantly alter Rhode Island’s tax structure and send a signal that the state wants to promote the growth of business’ and you want to know what we’ve got?”

“Well, how about slashing tax rates on capital gains? That one’s always popular.”

“What’s that?  Rhode Island tried that one already, it didn’t work, and the Legislature went back to taxing capital gains at the same rate as all other income?  I’m sorry to hear that.”

“Wait – didn’t your hand-picked Tax Policy Workgroup come up with a radical idea earlier this year to replace the corporate income tax with a tiered minimum tax?  Why not go with that? After all, the Workgroup spent over six months exploring various options and came up with that at the last minute.

“I beg your pardon?  The Legislature opposed that one as well?  Oh, I see.”

“OK, so how about replacing the corporate income tax with a business net receipts tax or BNRT?  It’s all the rage in California.”

“Yes, it’s true that one Commissioner – one of the leading state tax policy experts in the country – indicated that the BNRT ‘is fraught with economic disincentives’ that he feared would ‘harm California businesses.’”  Yes, I am aware that nine other well-respected tax experts earlier said that 'adoption of the BNRT at this stage would be highly imprudent.'  Yes, I know that the business community in California isn’t exactly thrilled with the idea either.  You can’t make an omelet without breaking some eggs, sir.”

“Well, think it over a bit and let me know what you decide.  I’m sure we can work something out.”

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