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February 11, 2006

I Fell Over In Shock

by Eric

After reading this article. What was so shocking? After all, there are quite a few states with flat income tax structures, and even quite a few states with no income tax. Well, two reasons really. First, Rhode Island has been, for quite a while, very anti economic liberty. And, this proposal was put forth by New England Democrats who, along with their California brethren, are about as far towards socialist as you can get in this country. They believe, heart and soul, that the government is here to provide “social justice” with “progressive” taxation and income redistribution schemes.

From the article:

House Democrats turned out en masse Thursday to support a massive tax reform package that will affect taxpayers from the top to the bottom of the economic scale.

The “Taxpayer Relief Act of 2006″ would give the richest Rhode Islanders the option of paying their taxes under the current system, which assesses 9.9 percent of their federal taxable income, or 7.5 percent of their adjusted gross income with no adjustments, deductions or tax credits. Over the course of five years, that 7.5 percent would be gradually reduced to 5.5 percent to bring it closer to the 5.3 percent currently paid by wealthy taxpayers in neighboring Massachusetts and the 5 percent tax in Connecticut.

Mmmmmm, I’m starting to get an idea of what’s going on here. How about you?

Lt. Gov. Charles Fogarty applauded the initiative, calling it “an excellent starting point on how we can make Rhode Island more competitive.

“When examining tax reform proposals,” Fogarty said, “we must consider two essential points: the need for a competitive tax system that is fair to all Rhode Islanders and maintaining the investment in important programs that protect our future and the health and well being of Rhode Islanders. While there are several areas where the state’s tax system can be reformed, the top priority must be property taxes, which continue to be well above the national average in Rhode Island and are severely overburdening homeowners and small businesses.”

In case you don’t know it, New Hampshire (a strongly libertarian state) has no income tax and Massachussets enacted a flat income tax two years ago (Teddy must have apoplexy). The problem Rhode Island faces is that they are not competitive with their neighboring states. So, small businesses and affluent residents are fleeing to Mass and NH. The whole concept of competitive government actually does work, you know. It’s tougher on the West coast with large states. But even here it works. One of the Liberty Papers contributors, Brad Warbiany, fled California because of its unstable budget, repressive tax structure and high cost of living. And he isn’t the only one, by a long shot. California is growing, but it’s not the middle class that’s growing. And RI has the same problem. So, they are going to try and fix it, because the loss to their neighboring states is clear and obvious. They are even proposing to enact sales tax holidays. My guess is that they lose significant business to Mass on their sales tax holidays.

It turns out that big government liberal ideology can, occasionally, be changed by reality smacking you in the face.


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3 Comments

  1. New Englad – Tax Reform Pioneer?

    I read today very interesting post that analyze the reasons why Rhode-Island is moving toward Flat Tax rate. Basically it is because they have no choice! Once neighboring states offer no income tax or flat tax the population and businesses migrations…

    Trackback by It looks obvious — February 11, 2006 @ 6:28 pm
  2. [...] I read today very interesting post that analyze the reasons why Rhode-Island is moving toward Flat Tax rate. Basically it is because they have no choice! Once neighboring states offer no income tax or flat tax the population and businesses migrations into these states have impact that cannot be simply ignored. Link: I Fell Over in Shock [...]

    Pingback by It looks obvious » Blog Archive » New Englad - Tax Reform Pioneer? — February 11, 2006 @ 6:28 pm
  3. [...] Rogel, at It Looks Obvious (newly added to the blogroll as well), followed up on my previous article about tax reform in Rhode Island. He did some research on migration related to taxes at the state level and that resulted in this article on his blog. The interesting part is, of course, this: From 2000 through 2004, a net 1.3 million people moved out of states with taxes on ordinary income and into those without such taxes, says Richard Vedder, an economics professor at Ohio University. [...]

    Pingback by The Liberty Papers»Blog Archive » Follow Up on Tax Migrations — February 13, 2006 @ 1:16 pm

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