Accountable USA - Rhode Island

Rhode Island spends modestly on economic development subsidies, befitting its small size, mostly through tax credits. One of its most important subsidies, the bluntly-named Corporate Income Tax Rate Reduction for Job Creation program, cost the state $7.5 million in FY2014.

The state’s subsidy and tax policies are greatly influenced by a handful of major companies – those long in the state as well as those recently lured from elsewhere. For example, Fidelity Investments brought in jobs from Massachusetts in the mid-1990s after Rhode Island state lowered taxes on financial services companies. Later it got Rhode Island to reduce taxes on executive bonuses and stock options (see below). Drug store chain CVS got a special deal from Woonsocket and has made extensive use of state tax credits (see below).

One deal in particular, with 38 Studios, has colored the perceptions of economic development subsidies in Rhode Island.  In 2006 the state guaranteed a $75 million loan for the nascent game design company, when the company went bankrupt Rhode Island was left on the hook for nearly $100 million.  The state sued owner Curt Schilling and settled out of court for $4.4 million in 2012.

In 2008, accountability groups led by The Economic Prosperity Institute (formerly The Poverty Institute) won significant transparency reforms. In addition to annual disclosure of the recipients of key tax credit programs, the law requires detailed reporting on job creation, wage rates and fringe benefits as well as disclosure of economic impact statements on subsidies and the creation of a Unified Economic Development Budget. The recipient reporting was put into effect, but the other provisions remain unfulfilled.

Out of the five programs we looked at, four have online disclosure: Corporate Income Tax Rate Reduction for Job Creation, Job Training Tax Credit, Enterprise Zone Tax Credits and Motion Picture Production Tax Credit. Still hidden are Manufacturing and High Performance Manufacturing Investment Tax Credits. 

Key Subsidy Programs

Subsidy Program Recent Annual
Online Recipient
Recipient Disclosure
Job-Quality Score**
Enforcement Score***

Corporate Income Tax Rate Reduction for Job Creation

as-of-right reductions in corporate income taxes for companies meeting various job creation benchmarks

$15.3 million (FY 2013)

Enterprise Zone Tax Credits

corporate income tax credits for companies creating jobs in special zones; criticized as too costly, ineffective, and favoring affluent areas

$868,000 (FY 2012)

Job Training Tax Credit

a corporate income tax credit of up to 50 percent of training costs for new or existing employees

$2 million (2010)

Manufacturing and High Performance Manufacturing Investment Tax Credits

corporate income tax credits

$11.1 million (FY 2013)

Motion Picture Production Tax Credit

corporate income tax credits for up to 25 percent of production costs for films and other electronic media projects

$3.1 million (2009)

* The score is derived from the Good Jobs First report Show Us the Subsidized Jobs (January 2014).

** The score is derived from the Good Jobs First report Money for Something (December 2011).

*** The score is derived from the Good Jobs First report Money-Back Guarantees for Taxpayers (January 2012).

Major Subsidy Deals

Fidelity Investments (1995 onward)

In December 1995, while seeking to get its home state of Massachusetts to reduce taxes on the mutual fund industry, Fidelity Investments announced that it would move 250 Boston-based jobs to New Hampshire and 650 to Rhode Island, where 350 or more additional people would be hired. Rhode Island, which had already lowered taxes on financial services companies, welcomed Fidelity and its 1,000 jobs by agreeing to provide $25 million for land and infrastructure costs. Fidelity’s annual lease payments would be reduced by $2,000 for each employee in excess of 1,000 added to its payroll.

The company later received about $1.3 million in sales tax exemptions for construction materials and equipment. When it came time to build the $75 million office complex, Fidelity insisted on using some non-union labor (and thus not necessarily paying prevailing wage rates), which led to picketing by union members and a number of arrests. The issue was also fought in court. In 1997 the state supreme court ruled that the project was not subject to prevailing wage laws. In 1999 Fidelity tried to persuade the state legislature to cut the top income tax rate for high-income earners by saying it would double the size of its Rhode Island complex if the measure passed.

That didn’t work, but in 2005 Fidelity succeeded in getting the state to enact legislation that cut by half the taxes on bonuses and stock options received by high-paid employees at companies that met hiring and payroll thresholds (the company agreed to pay more in corporate income tax to make up the loss in revenue). In 2006 Fidelity received a sales tax exemption worth about $364,000 on furnishings and equipment for a building it was renovating in downtown Providence. When Rhode Island began disclosing information on corporate income tax credits in 2008, Fidelity was shown to have received about $10 million in benefits the year before. (Key sources)

CVS Caremark (1997 onward)

In 1997 CVS benefited from a host of new subsidies established by the state, and special ones negotiated with the city of Woonsocket, after it acquired the Revco pharmacy chain and threatened to move its headquarters to either Ohio or North Carolina. CVS committed to building a new headquarters at an estimated cost of $20 million for the building and $30-$50 million for new computer equipment. In exchange it obtained both a 10 percent investment tax credit and an exemption from the state’s 7 percent sales tax on purchase of equipment and materials, including computer gear; job training credits of up to $5,000 each for new and existing employee; and a cap on local property tax increases of 15 percent every five years. The total value of the subsidies was not disclosed.

The company has greatly reduced its corporate income tax payments to the state since 2001 by claiming Jobs Development Act tax credits. In recent years those credits have been worth more than $10 million annually as CVS has been able to cut its tax rate in half. It is by far the largest user of the credits, accounting for about 80 percent of the total state value.  (Key sources)

Walmart in Rhode Island

  • Good Jobs First found no instances of Wal-Mart subsidies in Rhode Island, but given the absence of comprehensive centralized data, it is still possible that deals have quietly occurred.
  • We found no instances of property tax assessment challenges by Wal-Mart in Rhode Island, but given the absence of centralized data, it is still possible that appeals have occurred.
  • Wal-Mart was found to have more workers than all but one other employer (not including temp agencies) in the state relying on publicly-funded health insurance. This shows how taxpayers end up subsidizing Wal-Mart’s policy of providing low wages and inadequate benefits.

For more information, see the Rhode Island page of Wal-Mart Subsidy Watch.