November 23, 2014
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Legislation offers incentives for companies to hire
James C. Sheehan and K. Joseph Shekarchi

In keeping with the initiatives of the past two years in the Rhode Island legislature – to make Rhode Island a better place to do business, to eliminate redundant red tape, to focus educational efforts on workforce development – we think it is incumbent on us to find ways to help all kinds and sizes of business. We need to be creative and bold in bringing new and large firms to our state, certainly, but we need to be equally creative and bold in encouraging and nurturing the businesses that are here, so they can grow and prosper. Small and mid-size businesses are the backbone of our state job economy and helping them is imperative for the state’s economic health.

Having the highest unemployment rates in the nation is not a mark of distinction, it is a shame and a challenge we must address and resolve. Being ranked as one of the least business-friendly states in the nation is another black eye that needs to be treated and cured.

Tax incentives as an inducement to businesses to locate or expand here can be an effective tool as we try to fix our business image and put people back to work. One only needs to look to nearby New York State, which has established 10-year tax free zones to try to draw businesses to the Empire State.

To encourage business growth, and to try to reduce our unemployment rate, we have introduced legislation in the Senate that could be an enormous job creator in Rhode Island. 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.

Under the legislation, large companies would be eligible for a .25 percent tax incentive off their net income tax for every 50 new hires while smaller companies, which are typically partnerships or family businesses, would receive a .25 percent incentive off their personal income tax for every 10 new hires, provided that the rate reduction is no larger than 6 percent for the applicable business income tax rate and no larger than 3 percent for the applicable personal income tax rate. Those are savings that these companies can re-invest in themselves to help them grow even more.

And because accountability and transparency are important in relation to any tax incentives provided by the state, the legislation includes requirements for companies to provide annual employment reports to the Division of Taxation and for the Division of Taxation to provide annual reports to the General Assembly.

An important aspect of the legislation is that it ties the incentive to “qualified” jobs. This will help guarantee that Rhode Island businesses that benefit from hiring are putting Rhode Islanders to work in good-paying, sustainable jobs, not just minimum wage positions. The intent of offering an incentive is to see the creation of the kinds of jobs that are good for the worker but that also will enhance the companies and help them continue to grow and be productive.

We realize that proposing a tax reduction of any kind results in less revenue coming into the state, but we think we need to weigh the potential good that would come from an action such as this. We remember an old saying about business – sometimes you have to spend money to make money. Finding a way to provide a boost for businesses through a tax incentive will be good for those companies, good for Rhode Islanders seeking jobs and will have long-term benefits for the state.

(James C. Sheehan is the Democratic State Senator from District 36, Narragansett and North Kingstown, and the Chair of the Senate Committee on Government Oversight. K. Joseph Shekarchi is the Democratic State Representative from District 23, Warwick, and Chair of the House Committee on Labor.


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