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Chafee’s Budget: Taxes

Thursday, January 16, 2014

 

Pointing to no increases in "any broad based taxes" as one of the highlights of his FY15 budget proposal, Governor Chafee touted that "when Congress enacts the Marketplace Fairness Act", the budget directs revenue to reduce the State's corporate tax to 6.0 percent, and eliminate the sales tax on non-manufacturers' gas and electricity.

Providence City Council President - and potential Mayoral candidate Michael Solomon, said "I think the Governor's commitment to education and increase in funding is good not only for Providence, and the whole state. However, I would have liked to see more aid to city and towns, take the burden off property owners; tax relief. It was nice to see his commitment to eliminating the sales tax on commercial businesses for gas and electric." 

Solomon said he gave the budget proposal a "B".  

Justin Katz with the RI Center for Freedom and Prosperity took issue with the proposal, however,

"The constituents of the RI Center for Freedom & Prosperity are Rhode Islanders of all walks of life, with the promise to give them the freedom to realize their own potential, and this budget fails them horribly. Governor Chafee's most central message is that government should make as many decisions as possible. Simply allowing the law to stand so that a new Internet sales tax would automatically reduce the state's sales tax rate isn't good enough for him; he wants to take that new revenue and lower rates for corporations. "

Katz continued, "Eliminating the sales tax only for artists wasn't enough; he wants to spend taxpayer dollars for their benefit, too. This type of budget is a machine for picking and choosing winners and developing an economy that puts a premium on inside connections and favors."

Those who supported tax proposals in the the Governor's budget included Preserve Rhode Island's Valerie Talmage, who applauded the Governor's intent to provide access to an additional $52 million in historic tax credits for "unmet demand. "

"Last year we had $35 million in tax credits, and only 32 got funded. They only accepted projects the first 24 hours, because they announced an oversubscription that day," said Talmage. "We know there's a pent up need, we know this program helps every community in the state. We're thrilled. We're also supportive of the bond initiatives for the arts -- preserving museums and theaters that are a big part of the economy." 

 

Related Slideshow: The Ten Biggest Issues Facing the RI General Assembly in 2014

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#1

The Budget

The latest report by the House Finance Committee illustrates that Rhode Island will start the next fiscal year, which starts in July 2014, with an estimated deficit of $149 million. The report shows the FY 2014 Budget contains numerous overspending problems—meaning that the General Assembly will have to cut costs somewhere.

So where will the cuts come from? Lawmakers will have to examine the state's costliest programs. According to the Rhode Island Public Expenditure Council, the most expensive government programs in Rhode Island are Elementary and Secondary Education, Public Welfare, Pensions, Higher Education, and Interest on Debt. Click here to view a comprehensive list of the state's costliest government programs.

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#2

Bankrupt Communities

The state may be two years removed from Central Falls filing for bankruptcy, but 2014 could be the year that other financially strapped Rhode Island communities follow suit—most notably Woonsocket and West Warwick.

With bankruptcy on the table in both 2012 and 2013, this year poses more financial uncertainty for the cash-strapped city of Woonsocket. Earlier this year, the city's bond rating was downgraded due to the city's numerous financial issues—including a growing deficit, increasing unfunded pension liability, and a severe cash crunch.

Similarly, the embattled town of West Warwick faces a variety of financial questions in 2014. With its pension fund set to run out by 2017, the town must address its unfunded liabilities this year if it hopes to regain financial stability. That, coupled with an increasing school department deficit, make West Warwick a contender for bankruptcy.

Look for Woonsocket and West Warwick's elected state officials to address their respective cities' financial issues in the upcoming legislative session.

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#3

Sales Tax

With the Special Joint Legislative Commission to Study the Sales Tax Repeal set to report their findings to the General Assembly in February, the possibility of sales tax repeal in Rhode Island could become a reality in 2014.

"Our sales tax is killing small businesses, especially those in border communities," said Rep. Jan P. Malik (D-Dist. 67, Barrington, Warren), the commission's chair. "How can Rhode Island continue to compete at 7 percent, with Massachusetts already lower than us and considering reducing its sales tax even farther? How can Rhode Island restaurants compete at 8 percent? They can’t. We need to find a way to fix this, and a serious discussion of our sales tax is a discussion we need to have, now, before more small stores close their doors."

In addition to Malik, proponents of sales tax elimination include the Rhode Island Center for Freedom and Prosperity and Forbes Magazine.

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#4

EDC Reorganization to Commerce Corporation

On January 1, 2014, the Rhode Island Economic Development Corporation will be replaced with the Rhode Island Commerce Corporation—a move which has the potential to impact to adversely affect recipients of federal funding contracts made possible currently through the EDC.

This could include the state's Broadband Initiative, Brownfields program, and other contracts made through the EDC. As a result, recipients will now be required to re-apply for federal funding as of January 1st.

The massive overhaul of the EDC was prompted by the 38 Studios debacle, which is projected to cost Rhode Island taxpayers $102 million. 38 Studios, the now defunct video game company, filed bankruptcy in May 2012 just months after securing a $75 million loan from the EDC.

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#5

Marijuana Legalization

With the state's marijuana decriminalization law going into effect this past April, Rhode Island may be a candidate for marijuana legalization in 2014.

Legislation to legalize marijuana has been introduced in each of the last three years, but has never been voted on. Earlier this year, Rep. Edith Ajello (D-Dist. 3, Providence), who is chair of the Judiciary Committee, introduced the bill in the House. Roughly half of the Judiciary Committee supports the measure.

The bill also has the support of the Marijuana Policy Project, an organization focusing on drug policy reform, which hopes to legalize marijuana in ten states, including Rhode Island.

Approximately 52 percent of Rhode Island voters support legalizing marijuana for recreational use, according to a Public Policy Polling survey conducted in January.

Marijuana is currently legal in Colorado and Washington.

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#6

Constitutional Convention

Come November 2014, Rhode Island voters will likely be asked whether they wish to convene a constitutional convention, which involves individuals gathering for the purpose of writing a new constitution or revising the existing one.

Every 10 years, Rhode Island voters are asked whether they wish to amend or revise the constitution. Voters rejected this opportunity in 1994 and 2004. Although rare, Rhode Islanders can vote to hold a constitutional convention and in effect, take control over the state government.

If approved, a special election is held to elect 75 delegates, who then convene to propose amendments to the Rhode Island Constitution. These amendments are then voted on in the next general election.

The likelihood of this occurring highly depends on if the General Assembly does its job to ensure residents that the state is heading in the right direction financially and structurally.

Rhode Island’s last constitutional convention took place in 1986. It proposed 14 amendments—eight of which were adopted by voters.

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#7

Education Board Structure

Less than a year after the General Assembly created the 11-member Rhode Island Board of Education to replace the Board of Regents for Elementary and Secondary Education and the Board of Governors for Higher Education, there are multiple questions surrounding the structure of this newly consolidated agency.

Although lawmakers voted to merge the state's two education boards in June, the Board of Education now wants to split its agency to create two separate councils—one with the statutory authority over kindergarten to grade 12 and another governing higher education.

The Board of Education will present its proposal to the General Assembly during its next legislative session and lawmakers will once again determine how the agency should be structured.

The Board of Education currently governs all public education in Rhode Island.

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#8

Sakonnet Bridge Tolls

Rhode Island may have implemented tolls on the Sakonnet River Bridge this past year, but they could be gone by 2014.

On January 15, the East Bay Bridge Commission—which was established to allow lawmakers and officials investigate various funding plans, potentially eliminating the need for tolls on the Sakonnet River Bridge—will report its findings to the General Assembly. The General Assembly is then required to vote on the issue by April 1.

The commission was established in July following the General Assembly's approval of the 10-cent toll.

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#9

Superman Building

Located on Westminster Street in Downtown Providence, the former Bank of America Building (commonly referred to as the Superman Building) may be the tallest building in the state, but as of right now, it's just a vacant piece of property.

The building's current owner, High Rock Westminster LLC, was most recently looking for a total of $75 million to rehabilitate the skyscraper—$39 million of which would come from the state.

With the sting of the 38 Studios deal still fresh in the minds of lawmakers, a $39 million tax credit appears unlikely.

The question of what will become of the Superman Building remains to be seen. 

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#10

Master Lever

Championed by Republican gubernatorial candidate Ken Block (while head of the RI Moderate Party), the movement to eliminate the Master Level, which allows voters to vote for all candidates of one political party with a stroke of the pen, is poised to heat up in 2014.

Despite Block's strong push to repeal the 1939 law, the measure did not get a vote in the General Assembly last session.

In October, Block told GoLocal that he believes that House Speaker Gordon Fox is responsible for the General Assembly not voting on the proposal.

“Despite the support of a majority of 42 state Representatives, thousands of emails from concerned RI voters and unanimous testimony of more than 100 people who came to the State House in person to testify that the Master Lever had to go, the Speaker personally killed the bill in the most unaccountable way possible—he did not allow the House Judiciary Committee to vote on the bill,” Block told GoLocal.

Speaker Fox has stated on multiple occasions that he believes the Master Level is a legitimate tool that many voters use.

 
 

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