As the General Assembly prepares to consider Gov. Daniel J. McKee’s proposed fiscal 2025 budget, observers say his proposals to help small businesses may not add up to big amounts of financial relief but something is better than nothing now that one-time COVID-19 pandemic funding has dried up.
Among his measures aimed at small businesses, McKee has proposed reducing the corporate minimum tax from $400 to $350 – a measure that would be, in effect, “probably more symbolic than highly impactful,” said Scott Wolf, executive director of Grow Smart Rhode Island.
It's estimated such a cut could benefit about 65,000 entities, the majority of which would be limited liability companies and partnerships, and would decrease corporate tax revenue by $2.3 million in fiscal 2025 and $4.7 million in a full fiscal year.
The $50 reduction could indicate that McKee has plans to further decrease this tax in stages in the future, he said. “The governor may be viewing this as the first step in a multiyear effort to reduce [the tax] more substantially,” Wolf said.
Laurie White, president of the Greater Providence Chamber of Commerce, applauds even a small reduction. After all, the annual corporate minimum tax had been $500 until 2016 when it was cut to $450 and reduced to $400 in 2017.
“I would say if we continued to chip away $50 per year, we can actually reduce the corporate minimum tax even lower,” White said.
Overall, White said, she is pleased with McKee's $13.7 billion budget package, highlighting his proposal to raise the exemption for taxable retirement income from $20,000 to $50,000, and plans for investments into life sciences and cybersecurity facilities at the University of Rhode Island and Rhode Island College.
White said McKee appears to be taking a prudent approach at a time when the state's fiscal picture is cloudy ahead. "We have to take it slowly, so it doesn’t surprise me that there aren’t really any expansive, sweeping proposals here," she said.
Wolf saw more to criticize, particularly in McKee's funding plans for the Rhode Island Public Transit Authority – a subject that didn’t make it into the State of the State address.
The proposed fiscal 2025 budget sets aside $10 million for RIPTA, which Wolf said fails to meet the agency’s needs considering it has a $40 million operating deficit.
The ripple effects of underfunding public transit hurt residents and small businesses, he said.
“A lot of the people who use RIPTA right now don’t have other transportation,” Wolf said. "And if we want to increase people’s incomes, which is a laudable role of the governor, we should have a transit system that people can access ... as many employment options as possible, and as many child care options as possible.”
But Wolf was pleased to see a $100 million bond proposed for new housing, and felt that measures targeted specifically at small businesses were “reasonable and positive.”
House Speaker K. Joseph Shekarchi and Senate President Dominick J. Ruggiero were not available for comment on McKee's proposal related to business.
Ruggerio spokesperson Greg Paré said the Senate president “opposes increasing the income tax, including on high wage earners, at this time, and generally opposes increasing income taxes."
The Senate will continue working “to reduce the tax burden on residents and small businesses,” Paré said, citing past efforts such as eliminating the car tax; eliminating the tangible tax for most small businesses; and suspending the gross receipts tax on energy for the winter; and a $100 million American Rescue Plan Act investment in the state's unemployment insurance fund.
“We will look to maintain this progress and build upon it where possible, within the context of the overall budget,” Paré said.
In a statement, Shekarchi also noted the absence of pandemic-era funding as an influence as the House begins its review process.
“With the federal pandemic funds having been allocated, we must live within our means and carefully scrutinize all requests,” Shekarchi said.
