Rhode Island Looks To Lure Insurance Jobs To State

May 26--PROVIDENCE -- Rhode Island leaders are looking to lure insurance companies to the state with a proposal that would tie tax cuts to the number of jobs they create.

In concert with the Raimondo administration, Rep. K. Joseph Shekarchi and Sen. William Walaska, both Warwick Democrats, have introduced a pair of bills that would allow reductions in the state's 2-percent tax on insurance premiums if the industry adds employees. The bill requires the tax changes to be revenue neutral, with the idea that the tax cut will be calculated to match increases in income taxes from the new hires.

The proposal comes as neighboring Connecticut, a traditional insurance industry hub, struggles with a budget crisis and complaints from corporate leaders about its business climate.

Connecticut's premium tax rate is 1.75 percent and Massachusetts' is 2.25 percent.

On Wednesday, Rhode Island Department of Business Regulation Director Sidney "Macky" McCleary, who first came up with the idea, said it is not specifically targeted at Connecticut-based insurers, although Rhode Island would welcome them.

"We don't discriminate," McCleary said about where new employers may move from.

The plan is designed to take advantage of Rhode Island's size and the fact that states charge premium taxes based on the rates of the states where the insurer is based.

As a result, McCleary said, the rate reductions would have a larger revenue impact in larger states, which collect premium taxes from Rhode Island-based insurers at the state's lower rate.

The bill would not allow the premium tax rate to fall below 1 percent.

McCleary added that while other states have cut premium taxes to attract jobs, he believes no other state has taken an approach that ties those cuts to job growth.

"If we pass this, I am confident insurance companies will grow new jobs in Rhode Island and other insurance companies will move here," Shekarchi said.

Shekarchi pointed out that the concept behind the premium rate cuts is similar to a broader incentive program, known now as the Qualified Jobs program, that the General Assembly passed last year that rewards companies for hiring new workers.

Along with the premium tax-cut bill, a Shekarchi-sponsored bill that would remove some limits in the Qualified Jobs program was discussed by the House Finance Committee Wednesday.

The bill, requested by the Rhode Island Commerce Corporation, would reduce the number of new employees a business would have to hire, from 10 to five, to receive a tax credit. It would also remove a $7,500 cap on the amount any one business can claim in credits in a year.

"These changes will make our programs more accessible to small businesses in Rhode Island and in doing so increase potential for economic growth," Commerce Secretary Stefan Pryor said in an email about the proposal.

Since the Qualified Jobs program was approved, the Commerce Corporation has approved three companies planning to create 88 new jobs, for tax credits worth $2.2 million.

- panderson@providencejournal.com

(401) 277-7384

On Twitter: @PatrickAnderso_

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