In Governor Gina Raimondo‘s recently proposed budget, on page 317, lines 24-27, there is this:
“For purposes of a corporation’s state tax liability, any deduction to income allowable under 26 U.S.C. 1400Z-2(c) may be claimed in the case of any investment held by the taxpayer for at least seven years. The division of taxation shall promulgate, in its discretion, rules and regulations relative to the accelerated application of deductions under 12 U.S.C. 1400Z-2(c).“
This prompted Rhode Island State Senator Samuel Bell (Democrat, District 5, Providence) to tweet:
What does this small line in a thousand page document mean?
The line in the proposed budget is a state corporate income tax break that Governor Raimondo is proposing, modeled after President Donald Trump‘s corporate income tax break. In Trump’s bill, he made it so that states can draw zones around certain areas where rich people and corporations can make tax-free investments. In the Governor’s budget proposal, she is copying Trump’s tax cut for rich corporations who invest in these zones into state law, granting them additional, state level tax breaks.
Can we please ask a favor?
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Generally, these investment zones are supposed to be drawn in areas in need of economic investment, areas of poverty and neglect, what the Internal Revenue Service calls an, “economically-distressed community.” Governor Raimondo has included Downtown Providence and the corporate park where CVS is headquartered, as economically-distressed communities.
Josh Block, who is on the Governor’s communication team, forwarded my inquiry to Brenna McCabe, at the Department of Administration. She wanted to know if I was looking for a general explanation as to what opportunity zones are.
That’s not exactly what I was looking for, of course. I was looking for what I called, “a political explanation as to why a Democratic governor is buying into Trump tax cuts that she has publicly condemned.”
McCabe sent along some information on what opportunity zones are, but otherwise failed to respond to my inquiries by the deadline. I will update if and when she responds.
UPDATE: McCabe sent the following:
“This is not a partisan issue. In addition to attracting private investment for business expansion, startup creation and real estate development, Opportunity Zones also promote synergy with state and local efforts while supporting the needs of local communities. This Administration has been laser-focused on economic development and job creation, using every tool available to help Rhode Island prosper in a way that’s sustainable and innovative. If implemented in a thoughtful manner, we – like states across the nation – can use this as another tool to have meaningful impact on our economically-distressed communities.”
McCabe also noted:
“In April of 2018, Governor Gina Raimondo submitted to the United States Department of the Treasury nominations of twenty-five census tracts in Rhode Island, the maximum permitted by law, for designation as Opportunity Zones. In May of 2018, the US Treasury certified the nominations and finalized the designations of these twenty-five census tracts as Opportunity Zones. Under federal law, the designations will remain in effect until December 31, 2028 and the designations cannot be modified. The nomination and selection process of Opportunity Zones in Rhode Island was made in consultation with stakeholders and municipalities.”
“When it comes to cutting another $73 million from Medicaid, they say we’ve got to do it because we just can’t find the money,” said Senator Bell. “But when it comes to copying a core provision of the Trump Tax Cuts for the Rich at the state level, somehow the money is there. These Trump agenda policies are exactly what Democrats should be fighting.”
Here’s what Governor Raimondo released when the Trump tax bill was passed in December, 2017:
“The Republican-Trump Tax Bill is an unconscionable handout to millionaires and billionaires paid for by working families from cities and towns like Cranston, Warwick, Providence and every other part of Rhode Island. Senate leaders forced a vote without any debate while Americans were fast asleep and the ballpoint ink on the amendments was barely dry.“
In Frank Bruni‘s recent New York Times profile of Raimondo, he wrote that Raimondo “cringes at the growing use of ‘corporatist’ as a slur against Democratic politicians deemed too cozy with business interests.”
In the same piece Raimondo acknowledges that, “the system we have today is totally broken.” She is aware of “grotesque income inequality.” But it seems that instead of working to fix it, she’s content to engage in more corporate tax cuts and more failed trickle-down economic schemes.
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