R.I. cuts an onerous tax

For more than a decade, the Washington-based Tax Foundation has placed Rhode Island near the bottom for its business tax policies. But in one of the categories that shapes those rankings the state has made an impressive turnaround.

Thanks to changes made by the General Assembly at the recommendation of Gov. Gina Raimondo, Rhode Island businesses are saving some $30 million this year on the unemployment tax, which businesses pay to cover state unemployment benefits. And with additional changes that take effect in January, they are expected to save $40 million during the coming year.

In the process, Rhode Island businesses are saving an average of about $77 per employee during calendar year 2017, according to the state Department of Labor and Training. And with the additional changes, businesses will save about $100 per employee in 2018.

Such a change will have a real impact on local businesses. As Governor Raimondo said: “This tax relief will help businesses, especially small- and medium-sized businesses, invest in new equipment, new training and new staff. It makes Rhode Island a more business-friendly state, and will help more Rhode Islanders to get back to work.”

To be sure, Rhode Island must still do more to make business costs competitive here. There are many taxes that raise the cost of doing business in the state. Still, this cut was a step in the right direction, and it shows what can be done when elected officials shift their focus to job number one: improving the economy and increasing job opportunities for Rhode Islanders.

Rhode Island's eye-popping unemployment tax was a national embarrassment — one well-known to businesses, if not the public. The annual report on states' business tax climates produced by the Tax Foundation routinely ranked Rhode Island worst or near-worst in the category of the unemployment tax. In fact, Rhode Island was worst each year from 2006 to 2014 and again in 2017, and second-worst in 2004, 2015 and 2016.

But in the Foundation’s 2018 report, released in October, Rhode Island jumped from 50th to 23rd for its unemployment tax. That helped boost the state’s overall business tax climate ranking — also based on the corporate, sales, property and individual income taxes — from 44th to 41st, Rhode Island's best showing in 15 years.

Moving from 50th to 23rd for the unemployment tax was a dramatic improvement, for which Governor Raimondo and state lawmakers deserve credit.

The governor and the legislature have done a good job of luring some small outposts of well-known brand names to Rhode Island: Infosys, GE, Johnson & Johnson, Virgin Pulse, and others. But, as we have long argued, the state needs competitive taxes and regulations, as well as much better public schools, to significantly energize its economy and give its small businesses a fighting chance.

All of us should be glad that Rhode Island politicians are finally starting to listen to the long-ignored, long-forgotten people who are trying to make an honest living in the state. They pay the taxes that keep all the government services going.