Digging into the CVS tax credits UPDATED
You might have already seen this reported in the Providence Journal or Providence Business News– of Rhode Island’s $22.6 million dollars in tax credits for fiscal year 2011, CVS received more than $17.7 million dollars. That’s about 78% of the state’s tax credits.
If you want to take a closer look at the numbers, here’s the entire state tax incentive report.
CVS is one of Rhode Island’s largest employers. According to the Rhode Island Economic Development Corporation, it ranks #6 behind RI State Government, Lifespan, US Government, Roman Catholic Diocese of Providence, and Care New England for a total of 5,800 jobs. All of those other employers are either non-profits with no need for tax breaks, or government itself, so it makes sense that CVS gets a chunk of the tax incentives to keep those jobs here.
But that chunk is rising. According to an article by Ted Nesi back when he worked for PBN, CVS received 40% of the state’s tax credits, or 12.8 million dollars, in 2009. As Rhode Island’s total tax credits have decreased (down from $33.12 million in 2009 t0 $22.6 in 2011) the CVS tax credits have grown. Why?
CVS has not yet returned my calls for comment. This is the response from CVS on the tax credits-
Since the inception of the Jobs Development Act, CVS Caremark has added more than 1,000 full-time employees and now employs more than 6,200 people in Rhode Island. As a national employer, we view JDA as an important tool in bringing more business to Rhode Island and making it an attractive place for us to continue hiring in the future.
Here’s a description of what the Job Development Act is, from the EDC’s website.
The Jobs Development Act (RIGL 42-64.5-1) provides an incremental reduction in the corporate income tax rate (currently 9%) to companies that create new employment in Rhode Island over a three-year period. The reduction equals:
- A quarter percentage point (0.25%) for every ten (10) new jobs created, for those companies having a baseline employment below 100; or
- A quarter percentage point (0.25%) for every fifty (50) new jobs created, for those companies having a baseline employment above 100.
The corporate income tax may be reduced to as low as 3%. The rate reduction is permanent as long as the company maintains the same level of employment that it had at the end of the third year following the companyís self-selected base period. New employees must be paid at least 250% of the state minimum wage (the current state minimum wage is $7.40/ hour.) This benefit is subject to a finding of revenue neutrality and vote of the RIEDC Board.
The EDC is trying to get someone on the phone for me today. In the meantime, what do you think? Is this money necessary to keep a big employer in Rhode Island? Or should the state distribute the tax credits more evenly across the state?