Estate Tax? Corporate Income Tax? Sales Tax? Minimum Business Corporation Tax? Which of these taxes or combination of taxes is likely to be reduced as part of at least the House version of the FY 2015 state spending plan? New Speaker Mattiello and his new leadership team no doubt want very much to reduce taxes as part of their jobs and economic growth program. And Rhode Island certainly needs jobs and economic growth. The state’s unemployment rate dropped to 8.7% in March, the lowest jobless rate in Rhode Island since 2008. From December to March, the state gained 4,600 jobs, and 4,293 more people were counted in the labor force, an indication that more people are looking for jobs again.
But the state unemployment rate nevertheless, remained a full 2.0% higher than the national unemployment rate and Rhode Island is the state with the highest jobless rate in the nation. Rhode Island’s unemployment is much higher than other New England states – Connecticut’s unemployment rate is 7.0%, Massachusetts is 6.3%, and New Hampshire is 4.5%. Rhode Island’s unemployment rate has been higher than the national rate since July 2005 and Rhode Island has regained only half of the 39,800 jobs lost during the Great Recession while the nation as a whole has regained 95% of the jobs lost during the Great Recession. As a result, jobs remain the number one focus on Smith Hill and tax cuts as a spur to job growth are very much a possibility.
Mitigating against tax cuts is the state’s revenue picture as the Department of Revenue collected $27.6 million less than expected in March. Total revenue for the month was $303 million – 8% less than projected. The total general revenue in April will be an important factor in the fate of the tax cuts in the House budget.
The best current strategy for small business owners is to contact their legislators stressing that any tax reductions should include the taxes paid by and affecting small business owners so as to maximize the economic impact on job creation. The following are among the taxes directly affecting small businesses: income tax, sales tax, minimum business corporation tax, and estate tax. Robust regulatory reform could also be equivalent to a tax cut form small businesses. Rhode Island is a small business state and to grow jobs in Rhode Island, policymakers must reduce costs through tax and regulatory policies.