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R.I. House Continues to Consider Taxes; Sales Taxes

Date: May 14, 2014

The House Committee on Finance met to consider two proposals to lower Rhode Island’s sales tax last week. Based on the findings of the Sales Tax Commission headed by Representative Jan Malik (D-Warren), the more modest of the two proposals would lower the sales tax from 7% to 6% (House Bill 8083) keeping Rhode Island competitive with neighboring states. Massachusetts has a 6.25% sales tax and Connecticut is 6.35%. The second bill, House Bill 8039, would lower the sales tax rate from 7% to 3% with the goal of making Rhode Island a retail destination for shoppers.

While state revenue fiscal analysts fear the proposals will cost the state too much revenue, those supporting the sales tax cut cite dynamic economic modeling in contending that the revenue loss is significantly less than the state predicts. Lowering the sales tax will lead to job growth and spending growth and state revenue losses will be mitigated by significant new revenue.

Some opposition to lowering the sales tax was generated by the continuation of the higher current tax rate of 7% on certain industries, including restaurants and hotels. Narrowing the focus of the tax reduction lessens the state’s revenue loss. But, since both proposals would eliminate the state’s current sales tax on utilities, all businesses, including Rhode Island’s hospitality industry, would in fact receive some benefit from the sales tax cut legislation.

NFIB Rhode Island supports a sales tax reduction for Rhode Island. The state ranks near last in most nationwide tax and growth rankings and needs to make a sweeping effort to change policy to grow the economy. Reducing the sales tax will increase retail sales and lead to job growth, something Rhode Island desperately needs. NFIB will continue to monitor and advocate for tax reductions and other reductions in the cost of doing business over the last seven weeks of the legislative session.

But Speaker Mattiello, while praising Rep. Malik’s work on the sales tax, reiterated his intent to concentrate on lowering the corporate income tax rate and the estate tax during the last few weeks of the legislative session.

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