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Not Enough Taxes in the World to Save Providence


Providence, Rhode Island simply cannot generate the revenue needed to pay for itself, reports the WSJ:

Rhode Island’s capital has been squeezing its 178,000 residents for more cash since losing a significant chunk of a big revenue source: state aid.…

There are few options for the government to tap more money. The city’s commercial-property taxes are the highest in the nation among major cities, at $5,085 per $100,000 of land-and-building market value, according to a May report by the Lincoln Institute of Land Policy.

After the cut in state aid, Providence continued to let pension costs and spending on social programs rise. In 2011 the outlook was so bad that the city was seriously considering bankruptcy. The city has taken painful steps since then: firing public employees, skipping pension payments, asking for donations from non-profits and levying every imaginable tax.

Providence’s problems are particularly severe, but unfortunately not all that unusual. They illustrate the problem with blue governance across the country: at a certain point the extensive social programs and public services in these cities simply become unaffordable. Politicians eventually have to make a tough choice between cutting them, taking on powerful unions in the process, or raising taxes into the stratosphere to keep them running. These problems would be difficult anywhere, but many of these cities are located in areas that haven’t managed the transition to a service economy particularly well and have declining tax bases as jobs and people leave. Unfortunately, high taxes and tight regulations in many of these cities make it even less likely that new businesses will choose to move in and help spread the tax burden, further exacerbating the problem.

Regular VM readers know that this is the greatest challenge facing America in the coming years. Is Providence up to it?

[Rhode Island state capitol image courtesy of Wikimedia]

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  • Jacksonian_Libertarian

    All we are seeing at the moment is the worst of the worst Blue Model cities and states, as time passes more and more of the these Leftist controlled enclaves will show us their ugly faces.

  • Bruce

    “Raising taxes in to the stratosphere” to fund the pensions and social programs is not really an option because at some point this strategy raises less revenue as taxpayers bail and move elsewhere. VM knows this and should have stated this better. That’s exactly what happened in Detroit. These blue models certainly generate consistent results. One wonders how the advocates fail to see this (unless they don’t fail to see it and have other motives).

  • Anthony

    A commonality to your continued theme is structural problems and hesitancy in confronting them forthrightly (embedded interests). So WRM until issues like fiscal crises, corruption, poor business climate, etc. are honestly dealt with (and dealing with them are not easy), Quick Takes as above will remain part of Via Meadia’s contribution.

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