Sunsetting the Jobs Development

Testimony in SUPPORT of sunsetting the Jobs Development Act: H-7933
House Committee on Finance
April 9, 2024
Alan Krinsky, Director of Research & Fiscal Policy

The Economic Progress Institute supports Representative Stewart’s H-7933, which would sunset the Jobs Development Act (JDA) and end the preferential tax treatment provided by this tax incentive program.

The Rhode Island Department of Revenue’s Office of Revenue Analysis (ORA) has reviewed this program three times (in 2018, 2022, and 20231) and each time cast doubt on the program’s effectiveness:

• According to ORA, the program “is inconsistent with current generally accepted best practices regarding the design of economic development tax incentives.” [emphasis added]
• This program works by reducing tax rates rather than by issuing tax credits, and the ORA describes this approach as “unconventional and unwieldy.” ORA further indicates that the benefit is not aligned with the behavior intended to be incentivized.
• The program does not actually have any goals in place in statute, making it difficult to evaluate its success.
• The program was closed to new applicants back in 2015, meaning that only the same companies that have been receiving the benefits have access to the benefits; this also results in a competitive disadvantage for other firms, whether ones already here or one trying to enter the RI economy.

Even the Commerce Corporation, in statements included in the ORA reports, has consistently communicated its position that the JDA is less than ideal:

• In 2018: “[T]he next generation of investment tools – including the Qualified Jobs incentive – better serve the purpose of promoting economic development in a more effective and sensible manner.”
• And in 2022: “[T]he state’s current suite of investment tools, including the Qualified Jobs incentive (QJ), serves the purpose of promoting economic development in a more effective and sensible manner.”
• And in 2023: “In 2015, the Jobs Development Act (JDA) was closed to new applicants via legislation. The Commerce Corporation stands by that decision, considering that the state’s current suite of investment tools, including the Qualified Jobs incentive (QJ), serves the purpose of promoting economic development in a more effective and sensible manner.”

The program cost the state $171.7 million in the decade from 2013-2022:2

When we add in the $23.4 million for FY2023 and the costs for 2010 and 2011, the total cost runs above $225 million over the 13 years, with another $14.7 million projected for FY2024 and $19.1 million projected for FY2025.3 From 2017 through 2022, of the $102 million in tax incentives provided, $93 million went to Citizens Bank and its subsidiaries. This means that one company reaped 91.4% of the entire benefit during these six years.

We urge the committee members to review the ORA reports. As the 2022 report notes, looking back to the 2018 report, “[T]he recommendations above are the same as in the previous JDA evaluation as legislators have made no changes to the program, despite the identified deficiencies. Tax incentive evaluations cannot be documents that simply sit on a shelf…” [emphasis added]

The JDA is no longer a tax incentive program but rather a tax giveaway program. The legislation creating this program did not include a sunset date, which means the program will continue indefinitely unless the General Assembly takes an active step to close the program. We urge the members of this committee to take this step and forward the recommendation to the House floor.