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.

Related Content: News | State | Rhode Island | Tax Penalties

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