Representative Place and Senator Bell co-sponsor legislation to phase out corporate incentive giveaways
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State House, Providence – Rhode Island House Representative David Place (R-Burrillville/Glocester) and Rhode Island Senator Sam Bell (D- Providence) have teamed up to renew their efforts to limit costly corporate giveaways used to lure companies from neighboring states. They have resubmitted legislation to enlist Rhode Island in an interstate compact that protects public investments now, and in the future. A March 3, 2022 report by the Rhode Island Department of Revenue concluded that there are minor economic benefits deriving from the ReBuild RI tax credit, prompting interest by the legislators to defund corporate incentive programs by the state.
It is well-documented that corporate giveaways are among the least effective uses of taxpayer dollars to create and maintain jobs. In recent studies, including research from the Mercatus Center at Georgetown University, it is estimated that only one out of eight subsidies influences a company’s decision as to where to locate, whether to expand, or whether to stay put. That translates to the wasteful spending of $95B each year in states and cities who spend their taxpayer funded resources on this “economic development tool.” Subsidies must be funded by taxes – and higher taxes tend to discourage economic activity.
The subsidies are generated by redirecting funds that would be spent on essential public services such as education, public safety and infrastructure. They also fuel business inequality as only the largest businesses receive the vast majority of these funds. Place and Bell’s proposed legislation (H7642 / S2053) is viewed as a reasonable first step in the phase out of corporate giveaways, with an anti-poaching agreement among state governments that would prohibit state company-specific tax incentives and state company-specific grants as an inducement for entities to relocate existing facilities. There is a fiscal year-end sunset provided in this bill to determine its efficacy. In passing this legislation, Rhode Island would be a leader in this concept in the Northeast.
“Corporate welfare has a very poor track record,” said Bell. “When corporations get special handouts from our state government, our residents have to pay more in taxes to make up for these hidden tax breaks, subsidies, and loopholes. No one should be paying less in taxes or getting free money from the government just because of their political connections. Every business should be treated the same. It’s only fair. With a bipartisan agreement between the governors of Kansas and Missouri showing the way, it’s time to enact a national pact to end the practice of using corporate welfare to steal jobs from other states.”
“Free market and progressive socialist thinkers realize that the current corporate giveaway incentive system benefits the elite and well-connected, not the everyday citizen,” said Place. “A better return on our economic development investments would be to use the incentive funds given away annually in Tax Increment Financing (TIFs) or through ReBuild RI and the RI Film Office, to provide broad based tax relief to our homegrown small businesses across the state.”
“Whether it is investing in our small businesses, or properly investing in our necessary core government services, our increasingly limited fiscal resources demand a fresh look at where taxpayer dollars are best spent,” the Senator and Representative said in a joint statement. “It has been estimated that by repealing these special tax breaks, it would save RI taxpayers millions over the years. We feel the corporate giveaway system is a good place to start in our bipartisan call for creating smart and thoughtful changes in how we do business in the Ocean State. ”
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