by Divorced one like Bush
So you have been reading about the southern GOP’ers that are refusing parts of the stimulus money. Something about being true to their crede. Well, we here in RIland have a GOP governor who is doing one better. He want the money! The problem is in how he plans to use it to stimulate our economy.
Are you ready? Here it is: Tax Cuts! Is this not kind of like living with grand parents who refuse to acknowledge that the times have changed? Hey Grandpa, have you heard the news? Trickle down never fixed those shoes.
Our governor Carcieri is proposing the following for RIland’s share of the stimulus money: Reduce the corporate income tax from 9% to 7.5 in 2010 with a continued reduction to 0% (zero percent) by 2014. (Mass is lowering theirs to 8.75 next year, we are currently second to Mass.) Savings next year for business: $14.5 million The Chamber says this will help start up companies. I didn’t know start ups paid corporate income taxes. Based on the states own data, 3500 companies of 50,000 pay the current 9%.
Next tax cut: Lower the annual business tax from $500 to $450. My two businesses pay this tax. I’ll get a $50 break, but the big guy’s will get to share millions.
Next tax cut: Raise the estate tax to $1 million from $675,000 which was set in 2001. It would match the Mass threshold. Estate tax filers would save $1.5 million.
Next tax cut: Reduce the income tax from 5 levels of 9.9% to 3.75% to 3 levels of 5.5 to 3.5%. We already lowered the top once so that more rich would come live in RIland ’cause you know, they’re the only ones that make an economy. Well, the rich population has not increased.
RI has already had this discussion and guess what? The rich make out every time.
The best-off Rhode Islanders pay 9.9 percent of their income in Rhode Island state and local taxes, while middle income families pay around 11 percent and low-income families pay over 14 percent.
Furthermore, the well-off have recently received significant reductions in Rhode Island taxes. The state has chosen to phase-down the percentage of federal personal income tax used to calculate Rhode Island tax–from 27 percent to 25 percent. When the rate reduction and the pass-through of the federal cuts are combined, Rhode Island’s well-off have already received a large tax cut. When the rate cut is fully phased-in, the average cut will be $5,200 for the highest-income one-percent, but average only $97 for everybody else.
And the State loses every time:
State income taxes are deductible on the federal tax return. Thus, when a state cuts its personal income tax, the amount deducted on the federal tax return is reduced. With the lower deduction, the federal tax goes up. For example, for most taxpayers paying at the top federal marginal rate, every dollar in reduced deductions due to cuts in the state income tax will cause federal tax liability to go up by about 40 cents. Thus, the net cut for the taxpayer is 60 cents even though the state loses a full dollar in revenue.
Here is some more on RI’s taxes.
He does want to treat capital gains as ordinary income. Currently our rate is 1.67% “…or .83% in some circumstances.” There has to be a catch here somewhere.
Back in 1999 when we were having the discussion the alternative was:
For a tax cut of this size, there are some attractive alternatives. $42 million could hire 1,000 teachers. 1,000 teachers could reduce the average class size for 50,000 students from 25 to 17. It is a perfectly fair question to ask which is more important: giving an average tax cut of $7,900 to the richest people in the state, or improving these children’s education?(2)
Education is not the only option. 1,000 police officers could be hired instead, infrastructure improved, drug rehabilitation programs initiated or job training programs funded. Or a tax cut could be targeted to lower income taxpayers.
Kind of sounds like what the president and congress had in mind when they just passed this stimulus plan.
He’s going to end a variety of deductions: mortgage, property taxes and charitable contributions. Being that property taxes range from 5.9% (bottom 20%) to 4.7% (96 to 99%) but only 2.8% for the top 1%, I guess it’s bend over time for the majority.
In the end:
An estimated 110,179 filers will each pay an average of $1261 more in income taxes according to Carcieri’s tax study commission. The vast majority of them are individuals and couples making less than $75,000 annually…
It doesn’t end there. Oh no. He want to use the stimulus to pay the $10 million settlement in the Station nightclub fire. Well, at least the money would get in the hands of those who could use it and would put it to work (as in spend it, as in stimulate the economy).
Lastly he’s going to use the stimulus to close our deficits. $192.3 million for 2009and $239.2 million for 2010. What we do after that, I have no clue. But then again, we’re the state that used the tobacco settlement money to close our past deficits. It is why we are in the mess we are in now. I guess we’ll just hope another uncle dies and leaves us a fortune again when year 3 rolls around.
And finally, to help reduce the spending, he’s going to reduce the revenue sharing to the towns and abolish the Pharmaceutical Assistance to the Elderly program. Hope those 1%’ers say thank you to those elderly who will take the bullet for them.
So, what’s your governor proposing?