Now is the time for the press to check out why we have exemptions in the sales tax

Governor Chafee has proposed a "tax increase" in the way the sales tax is applied to attack the growing budget crisis facing Rhode Island and its 39 cities and towns. This has, as we might expect, drawn out all of the special interests in the State, as well as many of their Zoombies. These special interests are attacking the plan in order to defend their own special tax status and privileges they enjoy under the status quo. Of course that privilege, their exemption, is part of the problem. But they and the press won't admit it. It allows them to NOT pay for their fair share of the cost of government overhead services that they now enjoy for free.

A Typical Example??


In a lead article of the Providence Journal, "Chafee's proposed tax hikes add up for this Cranston family"  for example, we are given a list of added costs that a "typical" (whatever that means) middle class family these tax might mean. It assumes that they family did not have, and will not make choices about how they spend their money after the tax become applicable.

For example: Newspaper Subscriptions  $312  taxes $18.72.  The costs of the papers have been going up while the quality has been going down for quite some time. The outlets for public information have expanded significantly since the days when the newspaper was the only source of public information. So why do we still have an exemption for them today?

The imbalance of reporting in all media or "Why are newspapers excluded from the sales tax today anyway"

The article does not explain why these items were excluded in the first place. If we were to research each of these we might find that special interests lobbied the General Assembly at one time or another to get this special privilege. Once these privileges became law, everyone assumed it was a RIGHT. Nobody is going to question the right and the conditions that may have made it reasonable at the time it was passed into law.

 Those hidden exemption are subsidies

The general public is paying a hidden exemption to the sellers of those products and services  and to the buyers of those products and services .

The sales tax is called regressive by Liberals because it taxes the poor on the goods they buy while excluding the wealth for the services they buy. It is also made even more regressive by the special exemptions which, while intended to relieve some of the pain on the poor actually provide a higher dollar value relief to the wealth who purchase higher priced good in the same class. Take food for example:

A sales tax on a pound of bologna for example on sale for $1.50/lb would yield at a 2% sales tax an addition cost of $.03 cents for a pound that a poorer family might buy, while a pound of roast beef on sale at $5.00/lb would yield $.10 pound that a wealthier family might buy.   

The sales tax is called unfair by those small business sellers who have to charge a sales tax on the products and services they sell and by the buyers who buy those products. It imposes an administrative burden on the seller and gives an unfair advantage to their larger competitors who can spread the overhead cost over their  pricing of  larger volume and breath of their products. It also encourages those who can afford to drive to shop out of state for goods that are taxed at lower rate. This is seen every summer in the business from RI that goes to Massachusetts during Massachusetts' tax holiday sales.

Leveling the Playing Field

If all goods and services are taxed at a rate arrived at fairly AND removes the waste in the current tax system, then the tax payers would be better served.

First, because the tax cheats would be prosecuted or sued for their waste to the system ( lost revenue from the under the table deals), and  the tax avoiders would have a more difficult time finding true advantages in going out of state for minimal savings (price competition).

Second, removing the incentive to seek special exemption would  remove it as a political strategy (anti-competitive business practices) and the politicians in the General Assemble would have to publicly explain and justify why they are seeking such legislation and supporting such exemption (waste of public corruption).

Third, and Most important, is that spreading the total state debt and tax burden over the whole retail economy should result in a higher dollar return to the government for its services (distributing of government costs more fairly) and a lower competitive tax position for the state's tax payers relative to the two major competitors, Massachusetts and Connecticut (improving RI's competitive position in the region).

The Yes/BUT Media favors the Status-quo

While the newspapers are supposed to be balanced in their reporting, we can see in the discussion in the editorial pages and in the stories on the front pages that they are not. The full story is not being total, nor analyzed. Since the local TV media basically follows the newspaper story lines "how it is all unfair". This  makes the story line more believable to the public, even though its is incomplete and biased. Meanwhile, the other story line that the alleged cause for crisis blames the public worker and teacher unions and puts forth attacking these special interests is the solution to the problem.

Highlighting the Problem Does work


Don't get me wrong, the public workers and teachers union deserve the heat they are getting. They are being unfair to defend contracts that are unsustainable and unrealistic in the 21st century global economy. They are .being unfair to their members and the public who support them. Today's Projo also carried this story
 Providence union agrees to concessions. This shows that some  union leaders are beginning to see their responsibilities for the problem and are willing to take responsibility to become part of the solution.

But they are only one part of the special interests in the the General Assembly. The politician in the General Assemble are catering to many others as well. The Press should be looking at these special interests as well
 The press should  look into these special interests today as well as into the broader context of public tax policy.

As it is the Press is cutting the amount of hard news, rather than promoting their Yes/BUT PR propaganda.on limited space of the editorial pages and in the news sections. Instead, lets see some hard news about how these special interest tax exemption can about and why they should be continued.

The Yes/BUT have begun to raise their heads from their little tax shelters warrens. Now is the time for the press to check out these tax rabbit warrens and see what they are hiding in there.

Central Falls out of the frying pan and into the cauldron

Well it seems that a touch of reality has entered the Central Falls (CF) school crisis. When the union members discovered that there are over 700 - 800 teachers from around the nation willing to apply for the 90 or so opening created by the union leadership, reality struck. It seems that Central Falls is not the center of the universe. It is not isolated from the economic conditions facing the nation and the education profession. The local union can't control supply and demand on a national level.

Oh! Did I say, the union leadership caused the problem? The settlement reached between the teachers and the CF school administration is the same as the leaders refused to offer to their membership back in February. So where was the leadership then and why are they agreeing to it today?

It seems that threatening to sue, another union tactic, was not a viable option. So today, they are working behind closed doors to get their "FRIENDS" in the RI General Assembly to pass a law which

... seeks to prohibit the General Assembly from enacting changes to pensions that “diminish, impair or deprive” vested state employees of “presently existing rights or benefits.

Rhode Island State Senate Majority Whip, Dominick Ruggerio is the lead sponsor of S-2384, the Public Officers and Employees Retirement System Act. The bill will be taken up by the Senate Labor Committee this week ( week of May 16th). Like earlier efforts by these "FRIENDS" to impose binding arbitration on the cities, towns, and school committees, the unions are seeking a poison pill, golden parachute for themselves which is unsustainable.

If they succeed, they will be rewarding their older loyalists members at the expense of their younger members. This is a common union practice conducted every year through the bumping process which places seniority over competency in filling open positions. The future generation of teachers will have to pick up the future bill as tax payers and as dues paying union members.

But for the moment the school crisis seems to be under control. Out of the frying pan.

But according to the Providence Business News and the Providence Journal Central Falls has jumped into the cauldron of potential municipal bankruptcy. This is uncharted territory hundreds of communities and several states around the country are facing.

Receivership is a step away from bankruptcy. If Central Falls goes bankrupt, all contracts will be voided. The city may be required to unincorporate and to merge with a neighboring jurisdiction. These are the lessons we have learned from the failure of the banks, auto industry, among others in the recent national economic crisis.

It is no wonder that the Rhode Island Federation of Teachers and Health Professionals has reversed it position regarding Rhode Island's application for Race to the Top grants. This was a "no started" last week. Now it may be the only hope for some districts, such as Central Falls.

This afternoon the Providence Business News online published the following story, State law bars Central Falls bankruptcy. Because of state law, the GA will be called upon to help resolve the issue. This should be interesting to see how the politicians solve this one.

This is the legacy of years of greed and short term thinking that seems to be a characteristic of Rhode Islanders and the people they elect to public, union, and corporate offices.

Stay tuned while we keep track of the temperature

Addendum - Bangkok West

This is an addendum to yesterday's post and clarification

In light of yesterday's story about the teenage stripper, the Providence Journal this morning carries the following story, Providence legislator seeks to ban underage stripping

Rep. Joanne Giannini, D-Providence, said she is working on a bill that would ban anyone younger than 18 from working in strip clubs.

The story goes on to say that the teenager in question was from Massachusetts and was using a fake ID to get the job at the time.

This case may be an unusual and exceptional one, but it points to piece-meal approach that the legislature goes about when dealing with critical public policy issues. Loopholes whether by intent or ignorance are a hallmark of this part-time one party body. Short term and narrow political thinking have been the SOP (standard operating proceedure) of the RI Assembly for all too long. But as long as the people of RI are happy beggaring each other, it will continue.

Bangkok West? - Rhode Island Sex trade policy

The sex industry is a lucrative, pervasive and corrupting reality in the world today. Sex tourism is industrial policy and a major source of revenue for such "developing" nations as Thailand, Viet Nam, Philippines, Mexico, and Rhode Island.

What? Rhode Island?

Yes, there is a long and questionable history of a sex industry in Rhode Island. By intent or neglect, it thrives today. In today's Providence Journal there are two stories which point to the connection between the state's third world political culture and its sex industry.

First, on the Editorial page, focuses on the continuing debate about criminalizing prostitution. The question of sexual exploitation is a key element in the debate. But this is also an industrial policy question for the legislature. Private clubs and spas that can offer sexual services, albeit not "openly," but as long as it is done behind closed doors, are a major draw to the darker side of the Rhode Island tourist trade and economy.

In an OpEd piece: David Segal/Edith Ajello: Don’t turn prostitutes into criminals

01:00 AM EDT on Tuesday, July 21, 2009

Rhode Island state representatives David Segal and Edith Ajello write:

"...Many writers on these pages believe that many women who sell sex in Rhode Island do so against their will, that they are trafficked to Rhode Island by contemptible international syndicates. Somehow, they say, these women would be better off were we to empower police to arrest them, and the courts to imprison them.

We think that idea runs counter to the ideals and very purpose of our criminal-justice system: Since when do we arrest and punish the victims of crimes? Human trafficking is obviously a despicable practice; its magnitude in Rhode Island remains in question. "

While Segal and Ajello present the argument for and against criminalizing prostitution, they state that their primary concern is that criminalization would not help the victims of trafficking. This is a fair position if they had an answer. But the only way to solve the problem, according to them, is to wait.

Their conclusion is,

So, rather than enact legislation that will only make matters worse, let’s heed the advice of the experts. The Urban Justice Center’s Sex Worker Project put it succinctly. The solution to the human-trafficking problem “is more effective and vigorous enforcement of federal anti-trafficking legislation and passage of strengthened state anti-trafficking legislation, not the wholesale criminalization of the very persons you seek to help.

Their solution, if I read them correctly, is that it is too complicated for us -- "let the federal government solve the problem."

The second story raises questions about why our legislator and city councils are unable to solve the school funding issue. Is it because keeping kids in school might hurt the tourism industry?

Minors in R.I. can be strippers

01:00 AM EDT on Tuesday, July 21, 2009

By Amanda Milkovits, Journal Staff Writer

PROVIDENCE –– Rhode Island teens under 18 can’t work with power saws or bang nails up on roofs.

But dance at strip clubs? Sure. Just as long as the teens submit work permits, and are off the stripper’s pole by 11:30 on school nights.

According to the article

"State law says that anyone who employs a person under 18 for prostitution or for “any other lewd or indecent act” faces up to 20 years in prison and up to $20,000 in fines. But that isn’t enough to prevent underage girls from working in strip clubs, said senior assistant city solicitor Kevin McHugh, who researched the issue a dozen years ago when a teenage dancer was found at a raided strip club."

So why was this issue not addressed 12 years ago?

The article goes on

"When questioned about Rhode Island’s law, Michael J. Healey, a spokesman for the attorney general’s office, offered a copy of the current state law but did not comment for this article."

Nevada which has build itself on silver, sex and gambling has a more child friendly law than Rhode Island.

Again from the article,

Nevada, meanwhile, doesn’t let anyone under 18 work in casinos or in public dance halls where there is alcohol — and there are no strip clubs in Nevada without one or the other, or both, said Cartwright, of the attorney general’s office. Minors aren’t even allowed to deliver mail to brothels.

So, 12 years ago our political and justice administrative leaders learned that children were stripping for money in clubs which serve alcohol. Their solution was to do nothing, as they probably will do again. And now our legislators are proposing we do the same for those who, may drop out of school, and instead may graduate from dancing to the more lucrative profession of prostitution, willingly or as victims. And where is the line between child pornography and legitimate artistic expression.

There is a third world sex industry in Rhode Island which should and must be regulated -- through prohibition and/or strict regulation.