New Session of the General Assembly – Déjà vu

Date: January 15, 2014

The 2014 session of the General Assembly will focus again this year on the state’s moribund economy and frigid business climate. Despite good faith efforts in the legislature in 2013 to “move the needle”, the state remains at or near the bottom of lists of states based on rate of unemployment, cost of doing business, level of taxation, and other economic factors. 

As the key to economic recovery, small business owners know that, to reduce Rhode Island’s stubbornly high unemployment rate and put Rhode Island back to work, the state must act dramatically to reduce the costs of creating and maintaining jobs.

The state needs to address costs across a wide range of subject areas, including taxation and regulatory costs. Despite the state’s structural deficit the state must first resist the temptation to increase taxes, especially payroll taxes, as those increases will further depress job creation. NFIB supports efforts to reduce unemployment insurance taxes on employers to levels that allow Rhode Island’s job creators to compete on a level playing field with employers in other states. NFIB supports a complete review of the state’s temporary disability and unemployment insurance systems to identify those reforms that will maintain the state’s economic competitiveness and those systems’ long-term economic viability.  

Rhode Island policymakers should also address all taxes that make Rhode Island stand out as a place for business owners and wealthy job creators to avoid. One of those taxes is the estate tax. Rhode Island is among a minority of states that even has an estate tax. And among those states, Rhode Island has one of the lowest exemption amounts at less than $1 million. Finally, the estate tax is assessed against the entire estate once the estate exceeds the exempt amount. Rhode Island must act to eliminate the “cliff effect” for estates that exceed the exempt amount and continue on the path of increasing the exemption to the federal level of $5 million. 

Similarly, NFIB supports starting to eliminate the sales tax by lowering “border taxes” to ensure that gasoline and liquor sales and the resulting revenue are not lost to bordering states. Is there an easier state to leave than Rhode Island to find better prices? The state’s budget deficit may actually be lowered by lowering border taxes and retaining sales within Rhode Island’s borders. 

In the area of civil justice, the legislature should reduce the statutory pre- and post-judgment interest on damage awards in civil suits. Currently, interest on damages may be as much as 12.0 per cent. Rhode Island needs to pass legislation that will lower interest rates on damages to market rates. Lower statutory interest rates will encourage settlement of cases and eliminate the financial advantages of delaying resolution. In addition, market interest rates are fundamentally more fair and just.    

The state’s Office of Regulatory Reform’s on-going efforts to eliminate and consolidate duplicative and unnecessary rules and regulations has made several recommendations to streamline the regulatory process at the state and local levels to assist economic development and growth.

Private companies in Rhode Island need more flexibility in offering workers time off for state holidays without being liable for overtime pay. Companies will be able to conduct business when competitors in other states are conducting business and workers will be able to enjoy time off from work at a time of their choosing.

There is no silver bullet for the Assembly to cure what ails the RI economy. Action is needed on many sometimes small matters to tell the world that Rhode Island is open for business and wants to support their existing small business job creators and attract new ones.

The Assembly passed legislation in 2013 to allow Rhode Island businesses to pay their workers every other week, but final regulations issued by the Department of Labor and Training make it less likely that thousands of small businesses will implement the change. First, the rules require companies to re-certify their eligibility every four years. Why change payroll systems if you may have to change back in four years.

The legislation does require companies that pay bi-weekly to on average pay more than 200% of the minimum wage and to maintain a surety bond in the amount of the highest bi-weekly payroll in the previous year. But the regulations require applicant companies to provide copies of payroll records of the previous year to guarantee the average payroll exceeds 200% of minimum wage and to support the amount of the surety bond – a blizzard of paper that small businesses do not have the time to prepare and the DLT does not have the manpower to process and review.  

That Rhode Island is unable to permit businesses to pay workers every other week – a relatively minor change -- without mind numbing bureaucratic hoops and paperwork says a lot about why the state struggles economically.

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