Friday, March 25, 2011

Chafee's tax plan in Rhode Island makes sense

The following article was a recent letter to the editor of the "Providence Journal" which has not yet been published. It is my hope that they will quickly print this letter as day after day Governor Chafee is taking a beating in this newspaper over his proposals to raise taxes to close a budget deficit. How the hell do the Republicans always think that they can close deficits by reducing taxes for the wealthy? It's refreshing to see a governor take an approach that includes raising revenue as well as reducing spending.

Journal misses the boat on Chafee tax plan

I must say that the “Providence Journal” misinforms when advising citizens on Chafee’s tax plan (Editorial; “Chafee tax plan’s flaws” March 13, 2011). Consider this; Governor Carcieri reduced the number of state workers by 3000, reduced state pensions for future retirees, reduced state income taxes for the wealthiest, furloughed state employees for 12 days, and the deficit grew as did the unemployment rate. Something is not working, but what?

Fewer employees means more outsourcing of government work and privatization costs may very well be playing a significant role in driving deficits. We have seen in past “Journal” reports the exorbitant costs associated with outsourcing work to private concerns by some state agencies. Right-sizing state government may lead to significant savings and assist in improving pension liabilities.

The “Journal” comments that, “state employees continue to receive annual pay increases”; this is not true. Your editorial staff is always looking to balance the budget to the detriment of state employees. This will have a limited effect, and here’s why. From previous “Journal” reports, the estimated annual cost of each state employee is just under $100,000. With approximately 14,000 employees, all salary, fringe and pension cost approximate $1.4 billion. The state budget is estimated to be $7.5 billion this year. Employees account for around 18.5% of total spending. You can’t fix the problem with a focus on only 18.5% of cost, reducing income from the wealthiest while blindly outsourcing government work.

Additionally, you attack the sales tax as being “regressive” and “not exactly what you want to expand”. On the very same day, the “Journal” reports; “Federal Reserve Chairman Ben S Bernanke, at the National Governors Association winter meeting …… advised governors that lowering their sales tax rate while broadening the variety of goods and services to which the tax applies would result in a steadier stream of revenues, better positioning states ….” (“Chafee says he’s trying to ‘share the sacrifice’” March 13, 2011).

Governor Chafee is doing exactly the right thing, managing government with his brain and not a lopsided ideology. Does Chafee get it all right? No. The Chafee administration needs to really perform the “Big Audit” of privatized service cost which may be significantly driving deficits and study “right-sizing” government strategies. I would further advise Chafee to reduce the recommended 6% tax on car repairs to 1% and tax the yachts that line Narragansett Bay at the 6% rate. Until the toys of the wealthiest among us are taxed on a par with the taxes facing the middle class, Rhode Island is missing the boat.



No comments:

Post a Comment