Manufacturing Revenue

The Nyman Manufacturing Plant, East Providence. Photo taken by Ron Chouinard

By: Ali Morrow

It is the general idea that taxes help a society succeed. But is this the case when it comes to the manufacturers of New England?

Due to taxes, many manufacturers closed their doors or moved south. Between 1983 and 1992, 23% of employees in Rhode Island lost their jobs in the manufacturing industry. Manufacturing made up about 30% of the jobs in the United States, with service jobs making up 36%.

With the major recession of the early 1970s, which cost the jobs of thousands of manufacturing employees, it was difficult for manufacturers to stay in business in the Ocean State.

Items that were purchased for the purpose of manufacturing, like computer software, were to be tax exempt, according to an article in the State and Local Tax Lawyer written by Hans Lundsten. These items had to be used in the manufacturing of goods and did not include items purchased for experimental purchases.

In 2011, however, Governor Lincoln Chafee, proposed to make a change to the exemptions, placing a 1% tax on items purchased for manufacturing, such as machinery and equipment. This proposition would also lower the sales tax of Rhode Island from 7% to 6%. This move would have created a $2.8 million tax revenue. Opponents of the measure said that it would not be beneficial to the manufacturing industry which is fighting to stay alive.

One of the manufacturers that had to close their doors was General Cable, which was based in Pawtucket. Because of its closing, 125 people lost their jobs. Another business, Rau Fasteners of East Providence, was bought by a larger copany based in Atlanta, whihc eliminated 110 jobs.

One of the larger manufacturers that had to moved to a southern state was American Power Conversion. APC began in West Warwick in 1981, which was bought out by Schneider in Electric in 2007 and was then relocated to Pennsylvania. They all moved south because of the substantially lower tax rates. A fourth company that moved because of cheaper tax rates was the Nyman Manufacturing Company, which did business in East Providence. They moved their base of operations and plant to Troop County, Georgia. After the Blizzard of ’78 and Hurricane Bob in 1991, Nyman Manufacturing closed its East Providence plant because of the difficulties and expenses of keeping it running. The owner claimed that they did not want to continue operating in Rhode Island, stating that “we’re here because we’re here.”

A hypothesis that was tested by Paul Mlotok questioned whether there was a correlation between the activity of manufacturing and the tax rates of a town or city with a local manufacturer. In testing, it was found that in ten or so year increments, there was no correlation between the two. In further testing, however, it was found that there was a correlation between the start of Rhode Island in 1636 and the last year that data was taken, which was 1969. This proves that manufacturers do effect the tax revue of the state and how it adversely effects the economy if the manufacturing industry were to end.

Sources:

Kostrzewa, John. "Manufacturing: Can Anybody Stop Job Losses? Does Anybody Care?" Providence Journal - Bulletin, Feb 08, 1996. http://search.proquest.com/docview/397175611?accountid=28991.

Landis, Bruce. "APC Plans to Close Plant in W. Warwick." The Providence Journal, Mar 19, 2009. http://search.proquest.com/docview/397864163?accountid=28991.

Marcelo, Philip. "Tax Critics Take Aim at Chafee." The Providence Journal, Apr 28, 2011. http://search.proquest.com/docview/863840389?accountid=28991.

Tooher, Nora L. Journal-Bulletin,Staff Writer. (1991, Oct 22). SLOW DEATH: Manufacturing in rhode island 3 SURVIVORS the realist rhode island's costs-and attitude-send nyman off to georgia. Providence Journal Retrieved from http://search.proquest.com/docview/396967017?accountid=28991

Lundsten, Hans E. "Rhode Island." The State and Local Tax Lawyer 2:463-68. Accessed January 1, 2015. http://www.jstor.org.uri.idm.oclc.org/stable/42732231.

Mlotok, Paul. "The Effect of Manufacturing Activity on Local Government Finances in Rhode Island." Dept. of Food and Resource Economics Occasional Papers, 1971, 1-8.

Rosen, Richard. "Identifying States and Areas Prone to High and Low Unemployment." Monthly Labor Review 103, no. 3, 20. http://www.jstor.org/discover/10.2307/41841196?

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