Rhode Island business leaders turned out in force for a Statehouse hearing on a sweeping proposal that would hike the state’s personal income tax and expand the sales tax to include more goods and services.
Proponents argued the bill would generate more than $340 million in new revenue, while opponents charged it would create an anti-business climate and increase the burden on taxpayers. Both sides crowded the March 26 hearing before the House Finance Committee, filling every seat in the room. Most of those on hand had to be satisfied watching the proceedings on a video monitor in the hallway.
Laurie White, president of the Greater Providence Chamber of Commerce, predicted the state will “plunge into an economic death spiral” if the bill passes. “Rhode Islanders cannot afford $340 million in new taxes,” she said. “This is truly a bill in the classic definition of the word.”
But not all business people present opposed the measure. South Kingstown Realtor Jonathan Daly LaBelle argued more money is needed for local schools, and warned further cuts in education spending will keep Rhode Island growth stagnant. “We have to make sure that towns can meet the bar, the expectations, that the state and federal governments are setting,” he said.
If passed, the bill (H-7950 and S-2668) would raise income taxes by 2.5 percent; eliminate the alternative flat tax; and introduce a 5-percent capital gains tax. The state sales tax would be cut over time from 7 percent to 5.5 percent, but would be expanded to include goods such as luxury clothes and services such as tax preparation. The bill also calls for a one-time rebate of $600 for every homeowner and renter in the state.
Most of the business leaders present urged the committee to look for ways to trim state spending, rather than boost revenues.
“This bill wipes out all the gains we’ve made and would set us back years,” said Charles T. Francis, president of CB Richard Ellis–New England’s Providence office, the commercial real estate company. “Fix the real problem – government that we cannot afford.”
John Hazen White Jr., the CEO of Taco Inc., threatened to leave the state if the bill passes. He also warned that he could move 450 Taco jobs in Cranston to another company facility in Fall River. “Pushed to a certain point where it’s no longer worthwhile for me to be here, I’m gone,” he said.
Mary Bernard, president of the Rhode Island Society of CPAs, spoke out against expanding the sales tax. “Most of the services that would become subject to the sales tax are mom-and-pop businesses, not big companies,” she said. “It’s easy to relocate, so think twice before you push businesses over the border.”
Proponents of the measure – many of them advocates for social service programs – countered that the state’s current tax structure puts a greater burden on the middle class than on the wealthy.
“We’ve heard some spinning in this room regarding the income tax rate,” said Duane Clinker, a Rhode Island minister. “What we’re asking for is some fairness … If you make $18,000 a year in Rhode Island, your total tax burden is 13 percent of your income. If you’re at the top in income, your total tax burden is 6 percent.”
Rep. Arthur Handy (D-Cranston), one of the bill’s sponsors, said that past cuts in state taxes have simply shifted the revenue burden to municipalities. “We have been raising taxes – property taxes,” Handy said. “When you hear talk of people moving out of our state, it’s the property taxes.”
Before the close of the hearing, several members of the House Finance Committee indicated they are leaning against the bill. “I don’t see that going this route would be better for the state of Rhode Island,” said Rep. Steven Costantino, the Providence Democrat who chairs the panel. •
Read some of the flood of reader comments inspired by previous Providence Business News coverage of the R.I. Fairness Act hearing.
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