Josh Barro on why RI’s economic problems are so intractableMay 4th, 2012 at 3:45 pm by Ted Nesi under Nesi's Notes, On the Main Site
One of the biggest problems in Rhode Island policymaking, I think, is a lack of perspective – the state’s problems are looked at narrowly and locally, without paying nearly enough attention to national and global factors.
Forbes’ Josh Barro, one of the smartest analysts in the country today and a Nesi’s Notes favorite, isn’t stymied by that, since he lives in New York City. But he’s been keeping a close eye on Rhode Island over the past year and a half, and he’s got some important insights to offer us:
Within New England, Rhode Island faces a major structural disadvantage. Rhode Island’s per capita income in 2010 was $27,700. That’s actually slightly above the national average, but it’s far below Massachusetts ($33,200) and Connecticut ($35,100).
As a result, Rhode Island has both higher taxes and lower public expenditure than its neighbors. As of 2009, Rhode Island collected 10.1 percent of state GDP in taxes, outstripping Connecticut (9.9 percent) by a little and Massachusetts (8.9 percent) by a lot. But despite that, Rhode Island governments had only $4,638 in per capita tax revenue to work with, less than Massachusetts ($5,014) or Connecticut ($6,434).
In other words, any given Rhode Island taxpayer can expect tax savings by moving to Connecticut or Massachusetts, where he or she can also expect more generous government services. As such, it’s really hard for Rhode Island to stay competitive. Trying to match its neighbors on service delivery will mean having an outsized tax burden, and trying to match their tax rates means providing a lot less government.
(That may explain why Rhode Islanders feel overtaxed and think government services are inadequate.)
The whole article is a must-read for Rhode Islanders (and not just because I may have goaded Josh into writing it on Twitter). Fair warning – his conclusion will be a little depressing for locals. But if he’s right, we ought to start having a much more difficult, more nuanced conversation around here.