The tax centerpiece of the governor’s new budget is to reduce the corporate tax rate to 7% from 9% over the next 3 years, with the hope of creating a stronger economy and putting more Rhode Islanders back to work.
Indeed lowering taxes in general will boost economic activity. And yes, this business tax reduction would give our state the lowest corporate tax rate in New England. All good.
But just how much of an impact will the governor’s proposed tax cut have on the state economy? Especially when compared with the sales tax proposal our Center has recommended?
Utilizing, RI-STAMP, a complex state tax modeling algorithm commissioned by our Center and customized for Rhode Island, the three year projections from these two tax proposals can be compared:
|2016 Projected Changes
||Corp Tax (9.0% to 7.0%)||Sales Tax (7.0% to 0.0%)*|
|Private sector jobs||144
|Corp tax receipts ($million)||-$56.04
|Sales tax receipts ($million)||$0.92
|Income tax receipts ($million)||$2.8
|Other tax & fee receipts ($million)||$1.01
|Total state receipts ($million)||-$51.3
|Local receipts ($million)||$4.26
* Corporate tax data derives from the 2013 iteration of RI-STAMP, whereas sales tax data derives from the 2012 iteration; 2013 data for the sales tax should be available later in the week.