McKee to propose cuts to sales tax, other levies in budget plan

Updated at 9:08 p.m.

GOV. DANIEL J. McKee on Tuesday proposed a range of individual and business tax cuts during his State of the State address before the General Assembly. He is pictured above during his election night watch party in November. (AP FILE PHOTO/DAVID GOLDMAN)

PROVIDENCE Gov. Daniel J. McKee on Tuesday said his administration will propose several broad-based tax cuts in his fiscal 2024 budget, as well as increased investments in housing construction and public-school funding. 

During the annual State of the State address before the General Assembly, McKee provided details on his budgetary agenda, vowing to build upon what he sees as continued momentum with the help of a projected $610 million surplus and millions more in federal rescue funds. 

Reiterating previous calls to improve the state’s business climate made during his Jan. 3 inaugural address, McKee said he plans to use his first full term as chief executive to increase the spending power of both individuals and small businesses. He is expected to formally submit his budget document to lawmakers on Jan. 19. 

“The budget I’ll submit to the General Assembly will propose a broad tax relief plan to help Rhode Islanders navigate inflationary pressures and make our state a more competitive place to do business,” he said. 

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McKee’s tax-cut proposals include: 

• A $35 million tax cut by reducing Rhode Island’s sales tax, the second highest in the nation, from the current 7% to 6.85%. 

• $25 million in taxpayer savings over the next two years by putting a halt to the scheduled 3-cent increase on the gasoline tax set to begin on July 1. 

• Implementing a tax rebate for the gross receipts tax paid on energy bills, amounting to $35 million in taxpayer savings. 

• An undefined reduction to the $400 corporate minimum tax. The general corporate tax now stands at 7%. 

• Elimination of the so-called “litter tax,” an annual permit which ranges from $25 to $125 and is paid by business in the food and beverage industry.

In addition, McKee asked lawmakers to swiftly pass a bill banning “assault-style weapons,” which he said he would sign into law. 

On housing, there is $90 million in funds left from the $250 million allocated in the previous budget toward addressing the affordability crisis. McKee said his budget will prioritize the use of these dollars toward fast-tracking residential construction through the new Department of Housing, whose first director, Josh Saal, resigned last week.  

“My budget will create a robust state agency, with additional funding to help our unsheltered population and set them on a pathway to housing,” he said. “But one person, one department, or even one entire administration can’t address this problem alone.” 

McKee has also directed his staff to implement an “accelerated project delivery strategy” to “engage the private sector more comprehensively,” in order to speed up completion of public infrastructure projects. 

“Having these funds budgeted is not enough and it’s not enough to just have a lot of good ideas in the pipeline,” he said.  “We need to get these projects completed quicker.”  

McKee also gave a nod to both increasing educational funding and creating a thriving life sciences sector in Rhode Island, the top priorities put forth in recent weeks by Senate President Dominick J. Ruggerio and House Speaker K. Joseph Shekarchi, respectively. 

Without legislative action, declining enrollment in public schools would have led to a $30 million overall cut in school funding, according to the current formula.  McKee will propose an additional $57 million in school funding to the state’s 39 cities and towns and $4 million for “out-of-school learning programs.” 

And though short on specifics, McKee vowed to “double down and make a major investment in Rhode Island’s life science sector. 

“My budget will reflect this investment and I look forward to working with the speaker on this key priority that we both share,” said McKee. 

McKee’s speech was followed by an official response from the Rhode Island GOP delivered by Sen. Jessica dla Cruz, R-North Smithfield. Cruz said that McKee’s proposals do not go far enough to properly address the issues of taxes, housing and education. 

The GOP rebuttal included calls to outdo McKee’s sales tax proposal by cutting the levy to 5%, an amount lower than neighboring Massachusetts.  

De la Cruz said Republicans will also submit bills that would issue income tax rebates to Rhode Island taxpayers and expand public charter schools. 

Finally, de la Cruz called on McKee to rescind the appeal of a federal judge’s ruling that found the state’s truck tolling program unconstitutional, calling the appeal “a prime example of what it looks like to waste millions in taxpayer dollars.” 

(Update: Comments from de la Cruz added in 20th, 21st, 22nd, 23rd and 24th paragraphs)

 Christopher Allen is a PBN staff writer. You may contact him at Allen@PBN.com. 

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