PROVIDENCE – House and Senate leaders agree that taxes levied on Rhode Island businesses should be reduced. But the consensus ends there.
Speaking during the annual legislative luncheon Wednesday at the R.I. Convention Center and hosted by the Greater Providence Chamber of Commerce, the debate over reforms in taxes such the state sales tax, which Gov. Daniel J. McKee proposed in his budget to cut from 7% to 6.85%, settled along party lines.
Bally’s Corp. sponsored the luncheon, and more than 50 state legislators were among the hundreds of people from the Rhode Island business community who attended.
House Speaker K. Joseph Shekarchi would not commit to any specific reductions, noting how with federal funds to combat the pandemic no longer coming in, any tax cuts inherently eat into revenues.
“It’s not coming,” he said, referring to previous influxes of money the state received over the last two budget cycles. “So, we have to be smart about it…obviously we are going to look through the budget with a fine-toothed comb.”
GPCC President Laurie White pushed both democratic leaders for specifics on what types of tax reductions could be on the table in the current General Assembly session.
Senate President Dominick J. Ruggerio said he supports a change to the tangible tax paid by businesses on assets and inventory, calling the levy “onerous.”
“I equate it sometimes to the car tax,” he said, adding he finds the tangible tax especially cumbersome for small businesses. “We are going to be looking at that. We are not there yet, but we have some proposals.”
Ruggerio would not commit to any proposal that eliminated the tangible tax outright but said he may support a definitive amount or a potential multi-year phase out.
“We are also looking at reimbursement [to cities and towns] and how that would affect [municipalities],” he said. “We want to do it once and do it right.”
Reiterating her response to McKee’s State of the State address, House Minority Leader Jessica de la Cruz criticized the latest sales tax proposal as inadequate to address the cost to businesses needing to be competitive.
De la Cruz supports a “bolder” reduction to the sales tax by cutting it to 5%, arguing it would help both Rhode Island business owners by attracting out of state consumers, as well as the bottom lines of business in the state.
“We agree on the issues the state faces,” she said. “But we disagree on ways to fix the problems.”
“It’s not significant savings,” she added. “We need to be competitive with other states. And this could [result in] an influx of revenues.”
House Minority Leader Michael W. Chippendale harkened to the so-called “boat tax,” which the assembly eliminated in 1993 and which Chippendale argued was a boon to the maritime industry.
“We now have hundreds of businesses that serve that industry,” he said. “When you eliminate or lower taxes, it does become attractive.”
As for the tangible tax, “it is not just onerous, but crippling.” said Chippendale. “It can really knock a company down, particularly when the economy is tight.”
In addition to tax reform, legislative leaders’ disagreement over education funding policy was on full display. Ruggerio and Senate Majority Leader Ryan Pearson have been vocal about amending the state’s funding school funding formula, which has been in place since 2010.
After funding remained unchanged over the past three years due to COVID-19, public school districts are set to lose significant dollars due to declining student enrollment if the formula is unchanged. McKee’s fiscal year 2024 budget proposes an additional $58 million toward K-12 education, which includes $13 million in categorical funding for multilingual learners and special education, $16 million in reimbursements for districts to make up for declining enrolment, and $10 million in additional support for economically disadvantaged students.
Pearson said the current system exasperates inequities in student achievement.
“When you look at the number across the state, it looks like we are spending a lot,” he said. “But when you look at individual districts, there are some that are spending a lot and others [who are not].”
Shekarchi said he was amenable to tweaking the formula after more information is collected regarding pandemic impacts on student learning and where best resources should be targeted.
“I certainly think we can do a better job with the funding formula. [But] it’s a long and complicated process to change it,” he said. “You need to be cognizant that when you change it you need the best data available. And I’m not so sure the last two years is the best data [to rely upon].”
And there is unspent federal support. Shekarchi used Providence as an example, which still has $122 million in unallocated recue funds.
“Before you come to the state and ask for additional money…we should have an accounting of what they are doing and what they have done,” he said.
(Update: School funding discussion added in 18th through 26th paragraphs)
Christopher Allen is a PBN staff writer. You may contact him at Allen@PBN.com
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