JANUARY 2013
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Ocean State awash in business subsidies By Common Ground staff Was 38 Studios a case of a rare handout to a business or was it business as usual, perhaps on a larger than normal scale? A blockbuster investigative story from The New York Times last month suggests the latter. And Rhode Island is not alone. According to the Times report, states, counties and cities grant more than $80 billion in subsidies, tax breaks, and other similar kinds of incentives for businesses on an annual basis. Those businesses benefiting hail from every sector, including oil, coal, tech, Hollywood, big banks, and national retail chains, according to the Times.
The Ocean State may not be alone, but, by many measures, it deals out more incentives than other states in the New England region. Rhode Island state and local governments shell out $338 per capita in various subsidies to businesses, according to the report. As a share of the state budget, that comes out to 11 cents per every dollar—a ratio that puts this state above neighbors Massachusetts and Connecticut, according to an analysis of the Times data done by RIFuture.org. Tax incentives broke down by type as follows: $272 million in sales tax refunds, exemptions, and other similar
sales tax discounts; $59.9 million in the corporate income tax credit, rebate, or reduction; and $15.5 million in the personal income tax credit, according to the Times. (A state official has disputed counting sales tax exemptions for groceries as an incentive.) In terms of the top three industries that benefit, they are, in order: food, $156 million; manufacturing $61.6 million; and trucking, $18.4 million. A question of priorities The amount the state has devoted to such subsidies raises questions about its priorities— and the influence of business on state policymakers, espe-
cially at a time when the state is still somewhat in the throes of pension reform. “Rhode Island, according to the investigation, gives away $356 million in tax subsidies annually,” wrote Bob Plain, editor at the progressive blog, RIFuture. org. “That’s about the same as the state saved by reforming pensions.” Such questions resonate nationally. In 2011, states slashed public services and hiked taxes by a “collective $156 billion” according to data from the Center on Budget and Policy Priorities cited in the Times report. The sheer extent of the subsidies on a nationwide basis
also raises serious economic questions. “Despite their scale, state and local incentives have barely been part of the national debate on the economic crisis. The budget negotiations under way in Washington have not addressed whether the incentives are worth the cost, even though 20 percent of state and local budgets come from federal spending,” Times reporters wrote. Impact on the recession Such questions may be particularly acute in Rhode Island, a state that has weathered the worst of the economic See Subsidies cont. on page 2
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