Moore: Hotel Tax Hike is a Bandaid on a Gunshot Wound
Monday, March 13, 2017
Russell J. Moore MINDSETTER™
“So we beat on, boats against the current, borne back ceaselessly into the past.” --F. Scott Firtzgerald, The Great Gatsby
When I think about Providence’s financial situation, I’m reminded of that last, iconic line, perhaps the most famous ending line in all of literature, of Fitzgerald’s The Great Gatsby, which many consider to be The Great American Novel. (Though it’s a fantastic book, I’d personally give the nod to Herman Melville’s Moby Dick.)
For at least the last decade, the City of Providence has struggled to balance its budget, struggling against the current of oppressive liabilities. The city’s pension and healthcare liabilities combined are nearing roughly a combined $2 billion dollars.
Those liabilities have constantly eaten into funding for other, important investments in things like education, infrastructure, and social services.
Yet nobody has any real appetite to address the real elephant in the room, because it will be difficult and emotional. The public sector unions will point out that the liabilities weighing down our capital city, and therefore, our state, are promises made to workers. That’s true.
Past Promises That Haunt
But what happens when those promises hold back the rest of the city and put it in danger of collapsing under bankruptcy? Is that really fair to anyone? Is it fair to the students who have to learn in crumbling schools?
The oppressive liabilities are like an endless, unforgiving current that we’re continually swimming against, brought forward by poor decisions from the past. And when we try to have a discussion about them, all we hear about is how someone indebted us in the past and now we’ve got to pay for decisions we had no say in making.
I don’t think I know anyone who gleefully looks forward to reducing benefits (regardless of how lucrative they might be) ‘to Providence’s city workers. Yet it’s hard to see how a floundering city, on the precipice of bankruptcy, is a benefit to anyone. And if Providence collapses into bankruptcy, the state will be hard-pressed to find the money to bail it out. The state is struggling to repeal the car tax, nevermind bail out Providence.
There is another solution. Providence could create a new, municipal income tax, that would be very progressive in nature. The income tax could be applied to only individuals and married folks who meet a certain income threshold. This idea was first fashioned by former Rhode Island Congressional candidate a finance professional Michael Riley.
Tax Our Way Out?
That’s an attractive idea because it means that the wealthier folks who reside on Providence’s East Side would be paying for the consequences of their electoral decisions over the last two decades. And those are precisely the people who should be supporting this idea, because they generally like to brag about how progressive and fair-minded they are. (Don’t expect any “progressives” to support this, since they always want someone else to pay for their spending and bad decisions.)
Be that as it may, until Providence Mayor Jorge Elorza, or someone else, starts proposing real solutions that will actually put the capital city on solid financial ground, the city will continue to chase pennies in an attempt to get dollars.
Elorza didn’t create this problem. But he knew about it when he ran for office. And he promised us that he would work to address these issues. We need some leadership, and fast.
Don’t get me wrong: I don’t blame the Providence representatives for submitting legislation to increase the hotel tax, by 150 percent in an effort to garner an additional $2 million. Every dollar that the Providence delegation can raise from somewhere else besides Providence taxpayers is a dollar that their constituents don’t have to pay.
“Obviously we've been meeting with the executive branch. We were told this would generate around $2 million. Clearly, we need to derive revenue from other sources," said Lombardi.
“I think we'll get pushback from suburbs, hotels -- but you're always looking for alternative revenues.”
Lombardi is right. The city does, thanks to its liabilities, need as much revenue as it can get its hands on.
At the same time, it doesn’t do much good to make the city less business-friendly, given its reputation for having a harsh business climate. And chasing dimes to get dollars, to use another literary analogy, is a lot like Don Quixote tilting at a windmill.
Until the City of Providence reforms its entitlement spending, it will continue to beat on, against the current, bogged down by the past.
Russell Moore has worked on both sides of the desk in Rhode Island media, both for newspapers and on political campaigns. Send him email at [email protected]. Follow him on twitter @russmoore713.
Car Tax Exemption
Elorza's FY17 budget raises the car tax exemption from $1000 to $2000.
The exemption had once been as high as $6,000 in the City of Providence, which has the highest car tax rate in the state.
Elorza had pledged during his campaign to raise the examption up from $1000 -- which will have budgetary implications, but had been an issue of importance to Elorza due to its impace on lower-income residents.