Gary Sasse, the longtime local policymaker who most recently served in the Carcieri administration, is among those who aren’t sure about the idea of providing $40 million or more in state tax credits to convert the Superman building into apartments. Sasse explained his concerns in an email:
The most economically efficient tax policy is one that imposes the lowest possible rates applied on the broadest possible tax base. However, there may be instances were the use of tax policy in the form of credits or tax expenditures can be used to incentivize investment decisions in a way that is not inconsistent with the principles of economic efficiency or capitalism.
For example, if business is provided an R&D or Investment Tax Credit and these credits are available to all qualified taxpayers, one can make the argument that such use of tax policy is not inconsistent with capitalism, recognizing that there is no pure form of any economic system and the value of these tax expenditures should be aggressively monitored.
The type of tax credit that is being proposed for the Superman building does not meet the test outlined above. It is crony capitalism, where preferential tax is being afforded to the politically well connected. This is nothing more then socialism for the well-connected. Any plan to change the use of the Superman building, or any similar project, must be viable to the market or it is bound to fail, regardless of public subsidies.
The resolution of the historic tax-credit plan for the Superman building will tell us a lot – if Rhode Island decision makers are interested in rooting out crony capitalism, a traditional approach to economic development in Rhode Island, a practice of rewarding specific business interest with taxpayer-funded subsidies or largess. Just think of the opportunity costs of our policy of economic development driven by preferential tax treatment.
• Related: Q&A: Dean Baker calls tax deal for Superman building ‘crazy’ (March 28)