State Senate leaders last week unveiled a legislative package aimed at reining in property taxes and unfunded state mandates.
The measures would gradually reduce the maximum allowable property tax increase from the current 5.5 percent annually, to 4 percent by 2013. If a municipality wished to go beyond that cap, the voters would have to approve the tax rate in a special election. Currently, the law gives the power to the General Assembly to allow a city or town to exceed the cap.
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In addition, state general revenue spending for fiscal 2008 could not exceed the fiscal 2007 budget by more than 5.25 percent, and the allowable annual growth would be reduced each year thereafter, until it reached 4 percent for fiscal 2013.
Last month, Gov. Donald L. Carcieri, the R.I. Public Expenditure Council, and several business leaders called for a constitutional amendment to the same effect, with a 4-percent cap on property tax hikes and a cap of inflation plus 1.5 percent for state spending.
Rhode Island currently has no cap on annual state spending growth, though it does require, per a 1992 law, that expenditures not exceed 98 percent of projected revenue.
At a news conference April 12, Senate Majority Leader M. Teresa Paiva-Weed, D-Newport, said the Senate package offers a long-term solution to the problem of rising property taxes, which she said creates the biggest burden for state residents.
“I urge Rhode Islanders – look at your income tax forms,” she said. “The average Rhode Island family pays more than twice as much in property tax as they do in income tax. The property tax is the reason our overall tax burden is so high.”
The Senate’s tax relief package also includes a bill to eliminate unfunded state mandates. Any legislative committee considering a new mandate would have to estimate the cost, and the state would have to appropriate full funding before the mandate is instituted.
The bill also requires an update of the State Mandate Report, issued by the Division of Municipal Affairs, stating the costs of current mandates and recommending changes. Sen. Leonidas P. Raptakis, D-Coventry, said the state may need to repeal some mandates that have created costs for municipalities.
A third measure would increase the “property tax circuit breaker” that applies to elderly and disabled homeowners, increasing it to $300 from $250.
The House Democratic leadership introduced its own tax relief package, crafted in consultation with the Greater Providence Chamber of Commerce, earlier in the session. It included reform of a number of taxes, including income, property and car, along with a proposal to create a Department of Revenue to administer the state’s tax collections.
