Gary Sasse says 90 percent of $35 million in tax credits went to CVS and two out-of-state companies

In the debate over taxes  -- which ones to cut and which ones to raise -- any proposed change would result in winners and losers.

During a discussion of taxes on the Feb. 10 edition of WJAR-TV's "10 News Conference," host Jim Taricani asked how taxes could be cut while still financing the services that governments need to perform.

Gary Sasse, director of the Hassenfeld Institute for Public Leadership at Bryant University, said people need to be talking "about tax reform, not just tax cutting, the same debate that's going on nationally."

"You asked why it's so expensive to live here. Well, we don't invest in things that will grow the economy [like] higher education," he said. "We have such an inbred system of crony capitalism that we have tax loopholes that make no sense. Good sound tax policy is lowering rates and not having government pick winners and losers by favoritism."

Taricani asked Sasse if he was referring to "tax breaks for CVS and other types of things?"

"Absolutely," said Sasse. "There was a study put out by the Division of Taxation. They only looked at six of our tax credits that totaled about $35 million, $36 million. Three companies got 90 percent of that -- CVS and two companies not even located in the state of Rhode Island. They were in California."

Ninety percent of the tax credits were going to CVS and two California companies?

We went to the Division of Taxation website and found the report Sasse was talking about.

The division is required by law to report on six incentive programs, even though one was repealed in 2009 and the other is phasing out.

The remaining four distributed $34.4 million in tax credits (not quite $35 million but close enough) to 39 entities.

But one Woonsocket company, the pharmacy giant CVS Caremark, with a net after-tax income of $3.9 billion in 2012, got 59 percent of it.

CVS got $4.9 million from the state through the Economic Development Corporation Project Status program, in which the EDC waives the sales tax for construction projects. (Only projects approved before July 1, 2011, could qualify.)

CVS got another $15.4 million under the Jobs Development Act, which allows for a reduction in a company's corporate income tax rate if it creates and maintains a certain number of jobs.

Total: just over $20 million.

But wait, as the TV commercials say, there's more. Any entity that receives one of the six credits is required to disclose any other credits it gets from the state.

During that fiscal year, CVS received an additional $4.4 million from four tax credits; nearly all of it from a $4.3-million state investment tax credit, which is designed to encourage investment in buildings and equipment.

And what about the two out-of-state companies that Sasse was talking about?

Both benefited from the controversial motion picture production tax-credit program, which was designed to encourage TV, motion picture and video production in Rhode Island.

The credit can help production companies reduce their Rhode Island taxes. More often, those companies can raise money by selling unused tax credits -- typically through brokers -- to companies or individuals that owe Rhode Island taxes but have nothing to do with the entertainment business.

The biggest tax credit for the fiscal year ending June 30, 2012, was an $8.1-million break to Paige Productions Inc. of Burbank, Calif., which was producing the ABC medical drama "Body of Proof" and filmed its initial episodes in Rhode Island.

Another $2.9 million went to Moonrise LLC of Santa Monica, Calif., the production company that filmed "Moonrise Kingdom," a movie that has been nominated for an Academy Award in the best original screenplay category and was nominated for a Golden Globe Award in the category of best motion picture musical or comedy.

Add them all together and you have three companies garnering $31.3 million of the $34.5 million in tax credits -- or 90.1 percent.

"Keep in mind: that report is only dealing with six tax credits. There are others," Sasse said. "We ought to expand that report to look at more tax credits."

Are these tax breaks worth the lost revenue? That’s a matter of opinion that we wouldn’t rule on. But we will remind readers that a PolitiFact Rhode Island article from Dec. 19, 2010, noted that there is a lot of debate over the real value of the motion picture production tax credit.

The Rhode Island Department of Revenue was supposed to issue an evaluation of the incentives in January of 2012 but that report is still being prepared. We asked the Chafee administration for an explanation for the delay but didn't get a response.

Our ruling

Gary Sasse said that among six Rhode Island tax-credit programs worth about $35 million, "three companies got 90 percent of that -- CVS and two companies not even located in the state of Rhode Island."

Sasse is rounding off some large numbers but he was, in essence, correctly quoting the state report he was citing. We rate the claim True.

(If you have a claim you’d like PolitiFact Rhode Island to check, e-mail us at [email protected]. And follow us on Twitter: @politifactri.)

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