The following is a speech that I have prepared to present at a hearing up at the State House in protest of the "Economic Growth and Fairness Act of 2008". Growth and Fairness...what a joke.
My name is Michelle Girasole, and I am one of those “knowledge economy entrepreneurs” you are trying to attract to the state. I was actually born in RI, learned business from my own family of business owners, and received my education here with a marketing degree and M.B.A. from the University of Rhode Island.
I have started two companies in the last 6 years, both of which use the Internet to help clients - Rhode Island businesses - grow their sales. Our most delicious example is that Rhode Island’s own Venda Ravioli hired us to make sure that when someone in California or Texas, or London searched in Google for the words “lobster ravioli” or “Italian gift basket”, they found VendaRavioli.com and could place their mail order. We help companies in this state export their products cost-effectively on the Internet.
I came here to tell you a quick story that might demonstrate the perspective that business owners like me have with regards to your proposed “Economic Growth and Fairness Act”. Because last year, I faced a situation similar to what you are facing, on a much smaller scale.
Last August, my business partner Steve, who is also a Naval reservist, was commissioned for another tour of duty in Iraq – this time for a full 12 months. You can imagine the impact that his absence would create in a small 6 person firm like ours. With one less expert to do our clients’ billable work, we knew our revenue would decline. And we knew we would soon have a “deficit budget”, to speak in your language.
So, I sat down with my bookkeeper, and we realized we had two options: we could raise our rates, or we could reduce our expenses. We knew that the economy was shaky, that our clients were already asking us to do more with less, and that some of them would leave if we raised our rates. Instead, we made some tough decisions on how to reduce our spending.
We renegotiated contracts with vendors, we cut out the luxury items on our phone bills, meals and travel expenses – going back to bare minimums. We cancelled “nice-to-have services”, like our cleaning lady. So now I have to clean my own toilet. It ain’t pretty, but I’ll do what it takes to make sure my company stays alive.
I’m sure I don’t have to spell out the similarities of that process to what you are going through right now, faced with Rhode Island’s deficit spending. I don’t envy your task at hand. When you cut programs, people protest. When you raise taxes, people protest.
I get it. It’s a hard decision. But you have to get beyond the short-term fixes, and realize the long term impact of what you are proposing. You don’t have another tobacco company settlement to fall back on this time. You have to make sure Rhode Island emerges in a competitive position.
I want to point out the mixed message that the state is sending to businesses like mine about Rhode Island’s “business friendly” environment. Within the span of two weeks, I got two state notices, both referring to “Economic Growth”. On March 14th, I received this package from Saul Kaplan and the EDC. It reads: (read highlighted portion).
That sounded great to me. Saul Kaplan gets it. FANTASTIC. They are making 5,000 calls this year to companies like mine to increase the “innovation economy presence” of this state. I’m so happy I’m already here. This will be GOOD for business.
Less than a week later, on March 20th, I received an email detailing the “ECONOMIC GROWTH AND FAIRNESS ACT OF 2008”, effectively raising the sales tax, imposing a new 9% tax on my company’s services, imposing a new 9% tax on services my company uses, like payroll services, accounting services, and even the cleaning lady I can no longer afford will now be 9% more expensive. Gee, this will be BAD for business.
Do you REALIZE what a JOKE the mixed message is that the state of Rhode Island is sending to me, as a business owner?
Do you HAVE ANY IDEA how this ACT completely changes my opinion of RI to one that is business HOSTILE?
Do you know how this undermines the efforts of 5,000 phone calls the EDC is placing to attract new businesses to this state?
And, more importantly, does it even occur to you how EASY it is for a company like mine to move out of state? Every service we provide is online. We can shut the doors to our office, sell the furniture, pack up our laptops, and incorporate out-of-state VERY easily. And now you are giving us a strong incentive to do just that.
When my partner Steve returns from Iraq, he will decide whether to return to RI, or to move closer to his family in Florida. Hmm… Florida, where there are no personal taxes. Where there will be no imposition of a 9% tax on our income and expenses.
Guess what? If this act is passed, we WILL move our company out of Rhode Island. Have no doubt about that. Just like my clients wouldn’t shoulder our burden last fall, WE can’t afford to shoulder the burden of your overspending.
I may just be one owner of two small companies. But just like the manufacturing industry declined during last century because conditions were better elsewhere, business owners today look at the environment of the places where they operate. They go where the incentives are. And when their politicians are waving a stick, and insulting their intelligence by labeling it “economic growth and fairness”, it sends us a strong signal.
So, ladies and gentleman, I urge you to reconsider your proposal. Your focus should be on reducing your spending, NOT raising new revenue. The time is now for you to do the dirty work of cleaning the state’s toilets. Your expenses will not go down on their own. And if you cannot find creative ways to cut expenses, you will drive away your best “customers” – both the businesses and the consumers of this state. And without their revenue, you will continue the downward spiral of budget deficits indefinitely.
Thank you.