PROVIDENCE – Gov. Daniel J. McKee is standing firm on his commitment to taxing Paycheck Protection Program loans greater than $150,000.
McKee made his position clear on Tuesday during what will be a bi-weekly joint press conference with newly appointed Lt. Gov. Sabina Matos at the R.I. Department of Administration. The governor is modeling the meetings after a weekly press conference hosted by the governor and lieutenant governor of Iowa.
McKee and Matos gave prepared speeches and fielded an assortment of questions from the media. Matos said she is preparing a plan for her first 100 days in office that includes addressing housing issues and hosting a weekly small-business town hall on Facebook.
In response to pushback from the business community regarding taxation of PPP loans, McKee said every business that took a PPP loan is receiving some level of tax relief.
“I want to make it very clear that 88% of businesses that borrowed as part of the PPP loans were small businesses, and they were exempted at the $150,000 level,” he said. “So, you have about 10% to 12% of businesses that did borrow on the PPP that are not being taxed on the gross amount, they are being taxed on their profits.”
McKee said the reason for taxing the PPP loans is that during the fiscal year 2022 budget process, his administration needed to find about $133 million to balance the budget. “Washington, D.C., prints money, but the state of Rhode Island does not print money, and you have to balance the budget,” he said.
McKee said in fairness, “multiple businesses did not take PPP loans and they are paying on the first dollar of earned income. And every taxpayer in the state of Rhode Island is paying on their first dollar.”
McKee noted that he would accept the General Assembly’s decision to change the threshold for taxation.
“I don’t think it’s unfair for people who borrowed forgiven PPP loans of $5 million to $9 million and showed net profits of $300,000 to $500,000, or a million dollars, to pay their fair share,” he said. “If you didn’t make money, it didn’t matter how much money the loans were, you’re not paying taxes.”
When pressed on the issue by the Providence Business News, McKee said, “If the General Assembly wants to give tax credits to people who made a great deal of money during the pandemic, then I am not going to veto that.
“At the same time, I want people to understand the issue,” he said, noting that people who did not receive PPP loans are being taxed. “Most of our businesses did not take PPP loans, as well as the corporations that didn’t qualify” for them. “They made more money than they had in years, and they’re paying taxes.”
McKee said the state gave relief to the people and businesses “that really needed it, and I feel comfortable with that. If the General Assembly decides to give more relief, and they figure out how to work it into the budget, especially if the federal dollars can’t be used, I will have to live with that.
“They’re going to have to make $70 million worth of cuts or increase taxes by $70 million, [or] a combination of the two, in order to give tax relief to people who have had a net gain of two, three, four million dollars,” said McKee.
He added: “We covered the overlying share of small businesses that have been impacted – at least the ones I have been talking with who are struggling to stay in business and have responded to the need for a $5,000 loan just to pay their electric bill the next few months, or rent, or payroll for the next few weeks.”
As for the small-business relief grant program, McKee said that 75% of the $5,000 grants available from $20 million in Coronavirus Aid, Relief and Economic Security Act funds have been designated for businesses. He noted that about 3,000 people responded to the program after it opened on April 15.
“We expect to oversubscribe, and we have reserved a little bit of money in case we oversubscribe,” said McKee. “There are still funds left. Go to commerceri.com to apply.”
McKee said his administration is awaiting comprehensive guidance related to receipt and disbursement of $1.1 billion in federal aid the state will receive as part of the American Rescue Plan.
“It is critical that we use these dollars in a way that benefits all Rhode Islanders,” he said, noting that the state needs to take a long-term view in using the funds.
McKee touched on his proposed 2030 plan, which would project what Rhode Island would look like 10 years from now using its funding resources, including federal stimulus funding.
“The Senate president [Dominick J. Ruggerio] and [House] speaker [K. Joseph Shekarchi] are going to be partners with me in developing that plan,” he said. “There will be more details about that.”
In the wake of New Hampshire lifting its mask mandate, McKee said he plans to loosen restrictions incrementally by June 5. He did not say whether the state would lift its mask mandate.
“We’re on schedule to do 100,000 vaccinations this week,” said McKee. “On a per capita basis, I don’t know another state that has the capacity to do that.”
Cassius Shuman is a PBN staff writer. Contact him at Shuman@PBN.com.
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