If Rhode Island wants to attract new companies to locate here and encourage existing companies to grow, we need to offer solid reasons that our state is a very attractive place for business to operate.
Tax incentives as an inducement to businesses to locate in or grow in Rhode Island can be and have been effective. One problem we have encountered with such programs in the past, however, is that most of the incentives are designed to assist and attract large firms. What we need is to assist all businesses, including the many small- and medium-sized firms that represent the majority of employers in our state. We need to be creative in bringing new firms to our state, certainly, but we must also encourage and nurture the businesses already here so they can grow and prosper.
It remains an unfortunate fact that Rhode Island has the highest unemployment rate in the nation. Looked at another way, however, that means we have many individuals seeking jobs and the goal of state government must therefore be to encourage job creation and develop programs that help re-train workers for those new jobs.
Again this year, I have introduced legislation that I believe has the potential to be an enormous job creator in the state and that will work well with other legislation already enacted to improve Rhode Island’s business climate and overall economy. It is a program the new Commerce RI state office can include in its arsenal to promote job creation in our state and encourage new companies to move here.
The “Rhode Island New Qualified Jobs Incentive Act” would make tax incentives available to companies that hire new “qualified” full-time employees who work a minimum of 30 hours per week, with a salary that is at least 250 percent of the state’s hourly minimum wage. In other words, good quality, well-paid jobs.
A portion of this program already exists, and two major and highly successful Rhode Island corporations are taking advantage of it – Fidelity and CVS. Both of these companies, partly due to this incentive, continue to call Rhode Island their home, and both continue to thrive and add to their workforce. What we must do now is to make Rhode Island a good place for smaller and home-grown companies to hire.
Under my legislation, large firms would still be eligible for a .25 percent tax incentive off their net business income tax rate for every 50 new hires. Smaller firms, which are typically partnerships or family businesses, would receive a .25 percent incentive off their personal income tax for every 10 new hires. The rate reduction would be capped at 6 percent for the applicable business tax rate and at 3 percent for the applicable personal income tax rate.
An important aspect of the legislation is tying the incentive to “qualified” jobs, which will help ensure that businesses are not just creating a lot of minimum-wage positions but by are adding good-paying, sustainable jobs that will enhance these companies and help them continue to grow and be productive. The savings the companies receive through the tax breaks is money they can re-invest to grow more. And more Rhode Island jobseekers will have an opportunity to find good work at a good wage, which benefits families and neighborhoods and entire communities.
Obviously, incentives such as those proposed in this legislation could mean an immediate reduction in taxes collected by the state. But the overall effect of new job creation will be an economic boost for Rhode Island because these new employees will be paying income tax and buying houses, contributing to charities and spending money at Rhode Island establishments. The trade-off is worth the attempt and will actually prove more fiscally valuable to our state.
Amid all the dire reports about our terrible unemployment rate and continuing sluggish economy, we need to be bold and creative about how we bring business to our state, how we help businesses to grow. I believe enacting this legislation will be good for business, good for jobseekers and good for the economy.
The legislation (2014-H 7090) is before the House Committee on Finance. I urge Rhode Islanders who would benefit from a program such as this – small or medium sized businesses and workers alike – to testify when the bill is heard by the committee.
K. Joseph Shekarchi is the Democratic State Representative from District 23, Warwick. Now serving his first term, he is a member of the House Committee on Judiciary and the House Committee on Labor.