Citizens Bank headquarters, between two rivers in downtown Providence.
High Street Bank, founded in 1828, a precursor of Citizens Bank, in an 1898 photo. High Street established Citizens Savings Bank in 1871.
Adapted from Robert Whitcomb’s “Digital Diary’’ in GoLocal.24.com
Companies and their senior executives will always try to play states off against other in order to boost profits and thus executive compensation via friendlier tax and regulatory policies. So it is with Providence-based Citizens Bank’s apparently successful drive to get Rhode Island to give it a new tax break like the one that Massachusetts is giving to banks there. Citizens is the 14th biggest banking institution in the United States.
This involves jettisoning the current system, which bases a financial institution’s state taxes on the value of its property, payroll and sales, and letting Citizens, et al., use only sales to calculate their state corporate-income tax. This would give Citizens an effective $7.5 million tax cut.
Would Citizens move its headquarters (and perhaps some other operations, too) out of state, say to the Boston area, without the break? Maybe eventually, which would be a disaster for Rhode Island.
The painful fact is that Rhode Island must try to be competitive with its much bigger and richer neighbor and so is at the mercy of what Bay State policymakers decide in economic matters.
Much of what constitutes states’ economic-development policies is simply paying big companies to stay.
I increasingly believe that corporate-income taxes should be abolished and the loss of money to be offset by higher personal-income taxes. In the end, people, not some inorganic entity called a business, pay taxes, and the effort to avoid corporate taxes leads to what is in effect bribery of public officials through campaign contributions, etc.
