PROVIDENCE – In what it hoped would serve as a shot across the bow of the General Assembly, the Rhode Island Public Expenditure Council issued a report Tuesday, entitled “Tax Policy Analysis,” urging caution in any changes to Rhode Island’s tax system, according to Ashley L. Denault, policy analyst at RIPEC.
In particular, the 26-page report sought to influence the debate of tax proposals scheduled to be heard by the House Finance Committee on Thursday as part of its hearing on the supplemental budget for the current fiscal year ending June 30, Denault said. The state faces a projected $218 million budget shortfall, according to the Carcieri administration
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At issue, according to Denault, were two possible changes now under consideration to address the budget shortfall – repeal of the state income flat tax, and repeal or change of the cap on property taxes in Rhode Island. RIPEC is opposed to the repeal of the flat tax, she said, “unless there’s strong compelling evidence to go back on that commitment.” However, when asked what would constitute “strong compelling evidence,” Denault could not provide an immediate answer.
RIPEC is also opposed to any change to the cap of property tax increases in Rhode Island, Denault said, because the organization believes that this tax policy has proven to be very effective legislation. The report said that in fiscal year 2010, when the growth in property taxes was restricted to 4.75 percent, 27 communities enacted a levy below the cap, eight communities enacted a levy at the cap, and seven communities applied for and received permission to exceed the cap.
“The state must be mindful of taking a balanced approach to changing the tax code,” RIPEC said in its news release with the report. “Taxpayers, including businesses, must be assured of some measure of stability and predictability in their tax system.”
The RIPEC report sought to put the state’s tax policy choices in the context of the current tax system and national rankings for business taxes, sales taxes and property taxes. For instance, it noted that the Tax Foundation ranked Rhode Island’s business climate 44th worst in 2010, as well has having the 10th highest tax burden.
“Our message is that you can’t have piecemeal changes in the tax system without taking a broader approach,” Denault said. “While we recognize that there are pretty significant challenges facing Rhode Island,” she continued, “we’re trying to create a more holistic approach to tax policy changes.”
The report is available at www.ripec.org.
