TALKING POLITICS Taxation in the Ocean State remains a source of debate BY BRIAN C. JONES

During the past year, there’s been a debate not about whether Rhode Island taxes are high — they are — but how high they are compared to other states.

Governor Donald L. Carcieri said that the state’s tax burden is the fourth highest in the nation, higher than some surveys indicated (see "Is Carcieri skewing the debate on taxes?," News, This just in, April 9). Analysts pointing to studies showing the state lower on the food chain included officials at the Poverty Institute at the Rhode Island College of Social Work, who said the state is closer to the middle of the pack.

The Poverty Institute now says, however, that its calculations using new data from the US Census Bureau have the state in seventh place in terms of state and local taxes, expressed as a percentage of personal income. That’s up from 12th place when the figures were analyzed two years ago.

Does this mean the institute is moving closer to Carcieri’s view? Not necessarily.

According to an analysis by Ellen Frank, the Poverty Institute’s economist, the state’s ranking will probably fall when 2004 figures are used, rather than the 2002 data employed in the current list. Further, Frank says, ironically, that the current 7th place ranking is a result of what otherwise would be considered good news: Rhode Island’s economy fared better than that of many other states during the 2001 recession.

While many states saw sharp falloffs in tax collections during the recent recession, Rhode Island taxes kept coming in, she says. "This occurred not because Rhode Island lawmakers raised taxes, nor because other state’s cut taxes," Frank wrote on the institute’s Web site (www.povertyinstitute.org). "Rather, Rhode Island’s economy was less dependent on the high-tech and finance [sectors] and thus less hard hit by the recession."

Frank predicts that when figures for this year are included in two years, the Census Bureau rankings likely will put Rhode Island closer to its earlier 12th place ranking. "Following the fiscal crisis, many states raised personal income taxes, sales taxes, and taxes on corporations," she says. "Rhode Island increased only cigarette taxes and the business franchise tax, so it is likely that Rhode Island’s rank will fall when FY [fiscal year] 2004 data is released."

Does any of this really matter?

Probably not for many individual taxpayers.

Frank, in an interview, says that her analysis of figures going back 20 years shows, "We’ve been pretty much in the top one-third in tax burden" among the 50 states. "Unless we want to completely change the culture of Rhode Island," she adds, it’s unlikely that this will become a low-tax state, in part because we have a number of higher-cost social problems.

One oft-cited example is the state’s RIte Care medical health insurance program, which covers one out of 10 Rhode Islanders and is part of why the state is recognized as having among the best health-care coverage-rate in the nation.

Tax rankings could become important if they affect the state’s ability to attract or retain business. Frank doesn’t think they do, although many business groups disagree.

In any case, if the state’s political and business leaders believe that taxes must be sharply lowered to diminish its national tax-burden profile, some of Rhode Island’s progressive programs may be cut or reduced.

So the tax ranking comparisons will continue, with partisans looking to statistics that best support their cases.