Report: Tax Structure Hurts Rhode Island

Rhode Island’s tax structure is hindering is recovery efforts, an economic development study said Wednesday.

“The Rhode Island tax climate is still a challenge for the state with property tax, corporate tax, gas tax, utility and unemployment insurance rates all in the bottom quintiles compared nationally,” said the report by Fourth Economy Consulting of Pittsburgh. “Rhode Island’s tax structure does not compare either favorably or nationally.”

Fourth Economy, which collaborated with Britt Page Consulting and Economic Partners Inc., culled data from consulting firm KPMG and the Tax Foundation’s “Tax Matters” report.

Rhode Island undertook the study after receiving a $1.9 million sustainable communities regional planning grant two years ago from the federal government.

In December, Rhode Island and Nevada reported the highest seasonally adjusted unemployment rates in the nation, each at 10.2, although Rhode Island’s dropped two-tenths of a percentage point from the previous month.

Rhode Island, once a tool-and-die stronghold, experienced a 37% drop in manufacturing jobs from 2001 to 2011, according to federal Bureau of Labor statistics.

In addition, economic development has been a hot-button topic in Rhode Island since the 38 Studios fiasco unfolded last year.

38 Studios, a video-game company owned by former Boston Red Sox pitcher Curt Schilling, filed for Chapter 7 liquidation last summer, leaving Rhode Island taxpayers on the hook. The state’s Economic Development Commission had backed a $75 million loan guarantee in 2010 with the state’s moral obligation. Schilling’s assets, including the bloody sock he wore in a playoff game, are up for auction.

The study praised Rhode Island overall for its willingness to spend on economic development. It also said the Ocean State has cost advantages compared with its peers.

“From housing to energy to high-skilled labor, businesses can access all at -- relatively --bargain rates, in comparison to Massachusetts and Connecticut,” Fourth Economy said. The consulting firm also cited the access to the Boston market by Massachusetts Bay Transportation Authority commuter train from Providence.

Gov. Lincoln Chafee, who commissioned the report, welcomed it. “We must understand how Rhode Island fits into our regional economy, what our strengths are and where we can improve,” he said in a statement.

A separate study released Wednesday said Rhode Island is getting more diverse and should pay more attention to poverty among minorities. PolicyLink, an Oakland, Calif., nonprofit and the Program for Environmental and Regional Equity at the University of Southern California compiled that study.

Fitch Ratings and Standard & Poor’s assign AA ratings to Rhode Island’s general obligation bonds, while Moody’s Investors Service rates them Aa2.

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