Wine & Liquor Sales Increased 21.4% After Sales Tax Cut

Report: Government Data Proof of Retail Boom for 3.0% Sales Tax Concept

Wine & Spirits Increased 21.4% After Sales Tax Cut

Providence, RI – Imagine the parking lots of Rhode Island retailers filled with cars with Massachusetts license plates. Actual data from the State demonstrates that this is possible. The same level of economic stimulus – as projected by the Center by cutting the state’s overall sales tax – actually occurred when the same tax was cut on liquor and wine. This, according to a report issued today by the nonpartisan Rhode Island Center for Freedom & Prosperity, based on RI Department of Revenue data.

Among the report’s findings, in the years after the 7% retail sales tax on wine and spirits was repealed (to 0.0%) in 2013:

  • Wine and spirits sales saw a boost of 21.4% over the first two years (during the same time period, all statewide retail sales increased by just 8.3%).
  • The Center’s economic modeling tool projected a comparable 21.2% positive statewide retail impact if the sales tax were to be cut to 3.0%.
  • Current corporate-subsidy schemes claim just dozens or hundreds of new jobs at a budget cost averaging about $80,000/job;
    • Conversely, a 3.0% sales tax would create thousands of good new jobs at a 10X lower rate, or only $7,000/job per job.
  • Over $3,100,000,000 in retail sales growth would result from a statewide sales tax cut to 3%.

“After the wine and spirits sales tax was cut, my store’s overall sales have increased dramatically, in part fueled by more Rhode Island shoppers staying home, instead of crossing into Massachusetts,” said Jan Malik, former state Representative from Warren and current liquor store owner.

“As opposed to the anti-business, job-killing legislation being advanced by the progressive-left, our Center’s pro-jobs, pro-family sales tax plan would keep more money in the pockets of businesses and families and would create new opportunities for Rhode Islanders to improve their quality of life,” explained Mike Stenhouse, CEO for the Center.

Representative Robert Nardolillo III (R, D28, Coventry) has submitted legislation (H6105) that would reduce the state’s sales tax rate to 3.0%, from its current 7.0% level.

Representative Jared Nunes (D, D25, Coventry/W.Warwick). with support of Majority Leader, Joseph Shekarchi, has introduced legislation (H6127) for a special commission to study how the state can responsibly reduce the sales tax to 3.0%

Also, as the Center documented in a prior policy brief, “stealth triple sales tax burden” currently imposed on Rhode Islanders and how the sales tax is being used by lawmakers to stealthily take more money out of the pockets of Rhode Islanders in three unfair way ways.

In March, the Center published detailed economic modeling projections and analysis, demonstrating that a cut in the state sales tax to 3.0% would produce far more statewide and municipal economic benefit than would repeal of the car tax, as proposed by the Speaker of the House, or would free college tuition, as proposed by the Governor.

In 2012 and 2013, the Center proposed two major options for sales tax reform, as the most effective and highest value method for creating jobs and boosting the state’s stagnant economy: full repeal of the sales tax or cutting the sales tax to 3.0%. Links to this expansive past research can be found at RIFreedom.org/SalesTax.

The fact that the sales tax is regressive (disproportionately affecting poorer people) is uncontroversial, but reform is also a question of tax fairness.

3.0% Sales Tax, a Matter of Fairness

Stating his rationale for eliminating the state’s car tax (as his campaign for reelection puffed toward the election day finish line), Rhode Island Speaker of the House Nicholas Mattiello (D, Cranston) told reporters that the tax is “regressive” and “unfair.” The same can be said of the sales tax, which the RI Center for Freedom & Prosperity believes should be reduced to a rate of 3.0%.

That the sales tax is regressive — meaning that it disproportionately affects poorer people — is so uncontroversial that the point needn’t be argued, so here are four reasons the sales tax is unfair, too.

The Sales Tax Was Implemented for Specific Purposes… and Failed

When the General Assembly imposed the sales tax on Rhode Islanders for the first time in 1947 and revised its rationale in 1956 and 1988, legislators emphasized an “obligation to grant pay increases for teachers” and a dire need to provide more state money to “the several cities and towns now confronted with financial crisis.”

As Rhode Islanders continue to face high levels of taxation with no reduction in teachers’ claim to deserve higher pay or municipalities’ insistence that their finances are threatened without help from the state (even with the looming pension calamity having gone dormant for the time being), nobody can plausibly claim that the sales tax solved the problem that it was implemented to solve.

To the extent that the state’s tax burden drives Rhode Islanders out of the state to shop, to live, and to start businesses, thus harming the revenue of the state and its municipalities, the tax is actually undermining the very purpose for which it was implemented.

The 7% Rate Was Supposed to Be Temporary

Faced with a banking crisis in the early ’90s, the people of Rhode Island accepted a higher rate on the sales tax. As the New York Times reported in 1992, “To provide [the Rhode Island Depositors Economic Protection Corporation (Depco)] with money to repay the bonds, the state raised the sales tax to 7 percent from 6 percent, with six-tenths of 1 percent, or $31.8 million in 1992, earmarked for Depco.”

The expectation was that the increase was temporary, but that turned out to be yet another broken promise from the state government.

The Rate Is Supposed to Go Down with Internet Sales

Similarly, when legislators wanted to sell voters on the idea of taxing online sales, as through Amazon.com, they put a provision into the law to drop the 7% rate down to 6.5% “upon passage of any federal law that authorizes states to require remote sellers to collect and remit sales and use taxes.” Well, the federal government never passed such a law, but over the years, the state has cracked down on online retailers in a variety of ways.

Just this year, as part of her budget proposal, Democrat Governor Gina Raimondo has suggested a Remote Seller Sales Tax Collection program that would increase the reporting requirements on online retailers and pressure Rhode Islanders to pay the use tax. Her budget assumes $34,715,462 from the tightening of the taxation screws. Since the budget’s release, Amazon has stated that it will voluntarily begin collecting sales taxes for Rhode Island.

No elected officials have even hinted that the sales tax rate might go down accordingly.

Use Tax Crackdown Could Double-Tax Purchases

One of the measures the state recently implemented in order to impose a de facto online sales tax was, essentially, a minimum tax for purchases the government assumes people make online or out of state.

Under state law, Rhode Islanders are supposed to pay a “use tax” equaling the sales tax they avoided on any purchase from a non–Rhode Island retailer. As part of the fiscal 2015 budget, the state began requiring people filing their income tax returns to either catalog their out-of-state and online purchases and pay the appropriate use tax or to pay a minimum of $8 use tax for every $10,000 in income. In effect, that assumes that a household with income of $50,000 spent around $571 on purchases without paying a sales tax. (Naturally, the state set the minimum to go up with inflation every year.)

At the time this minimum use tax was implemented, the state budget experts estimated that the new requirement would raise about $2.2 million in revenue.

The combination of this minimum use tax with the new online retail program and Amazon sales tax collections means that many Rhode Islanders will surely be double-taxed on their online purchases. The budget does not change the calculation of the minimum, meaning that it still assumes online purchases, so any taxpayers who do not begin keeping records of all purchases — online, in Rhode Island, and elsewhere — and sorting through their receipts while filling out their income tax forms will by default pay a use tax on Internet purchases that were already taxed.

Indeed, the state seems to be relying on this double-taxation, because the budget documents do not change the use tax law (to account for online sales tax collections). Moreover, use tax estimates for the upcoming year do not appear to have been reduced as they would have to be if Rhode Islanders were to begin itemizing online purchases.

Rage Against the Unfair Sales Tax

In summary, Rhode Island’s sales tax — the highest in New England and 30th out of 50 in the country — was first implemented to solve a problem that it did not solve, has been increased with the promise of reductions that never happened, and is leading to a stealth double tax.

Not only is it unfair and regressive, but the Ocean State’s high sales tax confiscates resources Rhode Islanders could better spend elsewhere and acts as a drag on the economy and a job killer. The least the state can do is to drop the rate to 3.0%, which ultimately wouldn’t lose the government much more revenue than it expects to gain from online sales and would cost much less than the car tax elimination.

Click HERE To Expand To See The Press Release

FOR IMMEDIATE RELEASE: March 29, 2017

Rep. Nardolillo Submits Bill to Reduce Sales Tax to 3.0%
As a Matter of Fairness, Rate Reductions Owed to Rhode Islanders

Providence, RI – The State of Rhode Island has broken its promises and unfairly has denied its residents a cut to its nationally high state sales tax rate. Representative Robert Nardolillo III (R, D28, Coventry) is attempting to exceed those promises by submitting legislation (H6105) that would reduce the rate to 3.0%, from its current 7.0% level.

In a new policy brief published today, the nonpartisan RI Center for Freedom & Prosperity discusses a “stealth triple sales tax burden” currently imposed on Rhode Islanders:

-Rhode Island’s state sales tax, among the highest rates in the nation, was originally implemented for a specific municipal purpose, while subsequent increases were supposed to be temporary. In both cases, the regressive tax has remained a costly burden on Ocean State families and businesses.
-The sales tax rate was supposed to be reduced following the implementation of a national Internet sales tax. New Internet taxes are now being collected in the state, yet there is no discussion of rate reductions.
-A minimum “use tax” was recently imposed on Rhode Islanders who file a state an income tax return. This estimated tax was designed to account for purchases made online or out of state. Again, with Internet taxes now being directly collected, there is no discussion to reduce or eliminate this “use tax.”

In summary, the sales tax is being used by lawmakers to stealthily take more money out of the pockets of Rhode Islanders in three unfair way ways … and breaking promises made to the people.

Last week the Center published detailed economic modeling projections and analysis, demonstrating that a cut in the state sales tax to 3.0% would produce far more statewide and municipal economic benefit than would repeal of the car tax, as proposed by the Speaker of the House, or would free college tuition, as proposed by the Governor.

The complete analysis, which can be found on the Center’s website, includes discussion of:

-Why bold tax reform is needed
-Budget reconciliation options
-State spending chart
-General findings
-Two tables with multiple and detailed projections of private employment impact and of various “state” and “municipal” revenues

In 2012 and 2013, the Center proposed two major options for sales tax reform, as the most effective and highest value method for creating jobs and boosting the state’s stagnant economy: full repeal of the sales tax; or cutting the sales tax to 3.0%. Links to this expansive past research can be found at RIFreedom.org/SalesTax.

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Sales Tax Reform

A 3.0% Sales Tax: A Superior Economic Stimulus Than Car Tax Repeal or Free College Tuition

FOR IMMEDIATE RELEASE: March 20, 2017

Plans by Speaker and Governor Could Cost Jobs and Municipal Revenue Losses
Sales Tax Cuts Would Increase Jobs and Could Pay for Car Tax Reforms

Providence, RI – The nonpartisan Rhode Island Center for Freedom & Prosperity today published detailed economic modeling projections and analysis, demonstrating that a cut in the state sales tax to 3.0% would produce far more statewide and municipal economic benefit than would repeal of the car tax, as proposed by the Speaker of the House, or would free college tuition, as proposed by the Governor.

Among the takeaways of the analysis, which projected the impact of both the car tax and sales tax reform ideas, shows that a 3.0% sales tax would:

  • Keep significantly more money in the pockets of Rhode Island families and businesses ($585 million vs $215 million)
  • Produce thousands of new jobs, as opposed to potential job losses with car tax or tuition spending
  • Require lower budget cuts and/or corresponding tax increases than would car tax reform
  • Create a major revenue windfall for municipalities that could go a long way toward funding local “self” phase-out of the car tax, where car tax repeal (depending on how it is paid for) could result in lower municipal revenues
  • Would allow every Rhode Island family to save for any college education

“We appreciate that the Speaker and Governor both want see more Rhode Island families keep more of their hard-earned money. However, if we want to maximize the positive economic benefit for the people, we must conduct the proper due diligence and research to determine which course of action is most beneficial,” advised Mike Stenhouse, CEO for the Center. “Today, the Center offers well-researched projections from a credible economic modeling tool to add a third concept into this important debate. Any objective analysis of this data shows that sales tax cuts are the superior approach.”

The complete analysis, which can be found on the Center’s website, includes discussion of:

  • Why bold tax reform is needed
  • Budget reconciliation options
  • State spending chart
  • General findings
  • Two tables with multiple and detailed projections of private employment impact and of various “state” and “municipal” revenues

In 2012 and 2013, the Center proposed two major options for sales tax reform, as the most effective and highest value method for creating jobs and boosting the state’s stagnant economy: full repeal of the sales tax; or cutting the sales tax to 3.0%. Links to this expansive past research can be found at RIFreedom.org/SalesTax.

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3.0% Sales Tax: Superior Reform than Car Tax Repeal or Free College Tuition?

Car Tax, Free Tuition Programs Could Mean Loss of Jobs and Lower Municipal Revenues

3.0% Sales Tax Adds Thousands of Jobs, Increases Local Revenues

OVERVIEW:

As taxpayers continue to be asked to fund generous corporate subsidy programs, lawmakers are now dueling over two new spending ideas – reimbursing localities to phase-out the car tax and public funding for free college tuition – each of which would likely further raise taxes and fees on Rhode Islanders.

But would these programs make Rhode Island a better state? Or would the more innovative and bold policy concept of cutting the state sales tax help families become more self-sufficient?

Neither the Speaker nor the Governor have offered research or economic projections on the impact of their respective ideas. The Center, conversely, offers well-researched projections from a credible economic modeling tool.

As will be clearly demonstrated, the Center’s previously proposed 3.0% sales tax reform would help working Rhode Islanders and businesses much more than would car tax repeal or free college tuition. A cut in the state sales tax rate to 3.0% from 7% would :

  • Keep significantly more money in the pockets of Rhode Island families and businesses
  • Produce thousands of new jobs, as opposed to potential job losses with car tax or tuition spending
  • Require lower budget cuts and/or corresponding tax increases than would car tax reform
  • Create a major revenue windfall for municipalities that could go a long way toward funding local “self” phase-out of the car tax, where car tax repeal could result in lower municipal revenues
  • Would allow every Rhode Island family to save for any college education

Funding? Elimination of corporate welfare subsidies and free college tuition funds could go a long way towards paying for the $82.3 million required to dynamically fund a 3.0% sales tax … vs the $229.7 required to dynamically fund car tax repeal.

Regressive? While many view the current car tax play as regressive, a revenue-neutral car tax repeal plan would be further so in that low-income individuals who do not own a car, or who own a car valued under existing exemption thresholds, would be indirectly funding property tax relief for wealthier people. A 3.0% sales tax would disproportionately help low-income families. Similarly the college tuition and corporate welfare plans require lower income families and businesses to pay for benefits that will go, in part, to the more wealthy.

Fairness? The car tax plan would inequitably distribute money to localities, and would reward those cities and towns that imposed excessively high car tax rates.

Business Climate Benefit? The sales tax is a tax on business. Collectively businesses pay almost half-of all sales taxes. A 3.0% sales tax would reduce such costs across the board and improve our state’s last place business climate ranking. Car tax repeal would only impact those businesses that have company owned vehicles.

Municipal Dependency? The car tax repeal plan would make municipalities even more dependent on state aid via its associated reimbursement mechanism. Depending how the policy is implemented, municipalities may simply increase regular property taxes to compensate for the car tax no longer collected, avoiding the state tax cap. A 3.0% sales tax would give new revenues to cities and towns to able to phase-out the car tax on their own, especially when in combination with other “tools”  that could free them from state mandates and regulations.

Ease of Implementation? The car tax plan would require negotiation with low car tax municipalities, given the varying rates and exemption limits set by each municipality. Sales tax reform could be easily and uniformly implemented across the board.

BACKGROUND: Why bold reform is required

Rhode Island is losing the competition to retain and attract families who want to make our state their home-of-choice, where they can work hard, earn a respectable living, and support their families. But many Rhode Islanders feel left out. They are fed up with the status quo of ever-increased spending on special interest causes … and the perpetually high taxes and red-tape that are driving others out of town.

Our state’s stagnant population growth will likely result in the loss of one of our two precious U.S. Congressional seats after the 2020 census. This net-migration problem can be attributed to concerns about present and future financial security. Factors that contribute to this problem are obvious: In 2016 Rhode Island ranked as the worst state business climate in America and ranked just 48th on the national Family Prosperity Index (FPI) and on the Jobs & Opportunity Index (JOI)

People want restored hope that government is working for them and to feel that they have not been forgotten. To accomplish this, a bold reform idea is clearly required.

The RI Center for Freedom & Prosperity agrees with the Speaker of the House and with the Governor that Rhode Island families should keep more of their hard-earned income via tax reductions and that a college education should be more affordable. Car and property taxes, as well as college tuitions, are indeed high; they are an irritating or unbearable cost for most families. However, directly confronting those issues, may not be the most prosperous path forward.

The Center also believes that the state needs to  relieve burdens on employers, increase  our state’s consumer and tax base, and create more opportunities for meaningful work for those who want to improve their quality of life.

As such, not all tax and spending programs are created equally, as adjustments to certain taxes and fees will have greater impact on job creation and can be more of an economic stimulus than others. Given our state’s dismal national status, it is vital that Rhode Island takes bold and well-researched reforms to maximize the impact of every budget dollar.

Years ago the Center researched and proposed major cuts to – even repeal of – the state’s nationally high,  job-killing sales tax. A complex economic modeling tool that has been used by dozens of states and major municipalities, STAMP (State Tax Analysis Modeling Program), showed that for the Ocean State, sales tax reform, among all taxes and fees considered, would produce the greatest and most beneficial dynamic* economic impact.

However, neither the House leadership at that time, nor the special commission that was created to study sales tax cuts, were interested in re-configuring the state’s budget to accommodate for the major economic growth projected by STAMP.

But now today, with House leadership and the Governor apparently appreciating that tax and fee cuts would keep more money in the pockets of Ocean Staters, the Center suggests, once again, that reform to the sales tax would produce more benefit to families and businesses than would the Speaker’s or the Governor’s plan.

Not only would sales tax reform keep more money in the pockets of every Rhode Island family, it would reduce costs for every Rhode Island business. It would also spur increased consumerism by both in-state and out-of-state shoppers, and; most importantly … it would create thousands of good, new job opportunities.

The Center further researched which level of cut to the sales tax would produce the most benefit. It was clearly demonstrated that a cut in the sales tax to 3.0% would produce the best value for taxpayers and for the budget by creating a high number of jobs at the lowest budget-cost per job created.

*Based on 2014 figures from STAMP (State Tax Analysis & Modeling Program) developed by the Beacon Hill Institute. Dynamic scoring impact takes into account the “ripple” impact of tax reforms by projecting increases or decreases to other tax revenues and fees.

BUDGET RECONCILIATION METHODS

There are two primary methods to accommodate the budget to account for the impact of any tax cut or new spending program:

  1. Revenue Neutral” approach by raising other taxes to make up for the anticipated lost revenues or higher spending
  2. Spending Cuts” to other budget items

Or, some combination of the two.

To date, neither the Speaker nor the Governor have identified how they will reconcile, or pay, for their respectively proposed programs.

Revenue Neutrality?

The Center maintains that Rhode Island spends too much taxpayer money for the state to quickly break-out of its economic stagnation. No matter how lawmakers slice and dice the many taxes and fees that are imposed on our citizenry, our high level of spending – and corresponding need for high taxation – creates a permanent negative drag on our state economy.

RI State Budget Versus Inflation and Population Growth and Personal Income Growth (2001 Baseline)

In the past two decades, Rhode Island’s spending trajectory has risen far faster than inflation, population growth, or personal income would otherwise dictate.

By comparison, New Hampshire, which consistently ranks near the top of most national rankings, spends almost 50% less per person than does Rhode Island.

In order for any public policy reform to achieve maximum economic impact, it is necessary that budget cuts – without offsetting tax increases – are used to pay for the reform. However, the reality and history of public policy in the Ocean State tells us that lawmakers will likely consider only “revenue-neutral” scenarios, where revenue losses due to cuts in one tax are offset by increased fees or taxes elsewhere. While this practice would minimize or – as we will show – potentially eliminate any economic benefits in some cases, a revenue-neutral policy is seen as the likely political solution … as economically-unsound as it may be.

To be clear, the Center contends, for a state struggling as much as is Rhode Island, that revenue neutrality should not be the goal of bold tax reform … and that both tax and budget cuts are required if we want to generate maximum stimulus to our state’s stagnant economy.

Found Revenues? It has also been suggested by both the Speaker and the Governor, that “newly found” revenues from debt restructuring, casinos, or other sources, might be used to fund their new proposed spending. It is the Center’s contention that such new revenues should be applied to help pay for sales tax cuts.

In order to set the outside parameters for economic impact, the Center created two tables? Each compares the long-term dynamic* scoring of the two tax reform concepts for Rhode Island: 1) phasing-out the car tax; and 2) phasing-down the sales tax to 3.0%:

  • TABLE-1 assumes “revenue neutrality,” with offsetting tax increases, to pay for each policy option
  • TABLE-2 assumes “spending cuts” to pay for each policy option

Any actual implementation of either of these programs would likely fall within these parameters.

Because the governor’s free college tuition plan and the state’s current corporate welfare strategy technically do not qualify as tax reforms, we are not able to effectively run them through the STAMP model. Their economic impact, based on the findings and theory of the model, is assumed and referred to separately.

FINDINGS

Taxpayer Savings and Increased Purchasing Power: The Speaker’s car tax plan would directly save taxpayers $215 million in property taxes, while a 3.0% sales tax would put $585 million back into the pockets of Rhode Island families and businesses, and eventually back into the economy. However, the net dynamic impact would be far less – or even entirely eliminated – if other taxes and fees are hiked under a revenue-neutral approach.

A 3.0% Sales Tax is is the most beneficial reform in terms of jobs, economic stimulus, business climate, and budget value … regardless of whether a revenue-neutral approach is adopted or not.

Car Tax Phase-Out Could Lead to LOSS of Jobs.  Car tax reform, on its own, is a minor economic stimulus at best, as it does little to improve the state’s dismal business climate.

A revenue-neutral car tax phase-out would necessarily increase statewide taxes and fees (relatively) – even while most car owners would pay lower local property taxes – and would lead to a net loss of jobs. This is because the negative economic impact of increased state-level taxes is significantly greater than the positive impact of lowered local taxes.

If a “spending cut” approach is taken, car tax repeal could spur the creation of a limited number of new statewide jobs, but at a significantly lower level, and with far more required budget cuts, than a 3.0% sales tax with spending cuts.

Free-College Tuition Could Also Lead to a LOSS of Jobs. Similarly, using the same STAMP theory, providing free-tuition  would also increase statewide taxes and fees (relatively) – even while some in-state families would have more disposable income due to lowered fees – and would lead to a net loss of jobs. Again, this is because the negative economic impact of broadly increased state-level taxes is greater than the positive impact of more disposable income for a more narrow base.

Under a ‘spending cut’ approach, free college tuition, as car tax repeal, might produce a limited number of new statewide jobs, but at a significantly higher cost per job, than a 3.0% sales tax with spending cuts.

Rhode Island’s Current Corporate Tax-Credit Economic Development Strategy is highly inefficient as it creates relatively few jobs at an extremely high cost per job to taxpayers. Using the same STAMP theory, the negative impact of requiring increased statewide taxes to pay for the credits is presumed to be greater than the positive impact of a few hundred more people working.

Further, this targeted ‘advanced industry’ approach does little if anything to improve the overall business climate, which is necessary if organic entrepreneurial growth is to occur on its own.

EXPLANATION OF S.T.A.M.P. PROJECTIONS (see Tables 1 & 2)

ECONOMIC EFFECTS

Private Employment (or Jobs). Both the Speaker and Governor claim that “jobs” is their top economic priority. Sales tax reform produces significantly more job-growth, regardless of revenue-neutrality, while car tax reform and, as explained above, free-college tuition could lead to a loss of jobs under a revenue-neutral approach.

Investment. The increase/decrease in capital invested in the state due to tax reforms. As with employment, sales tax reform always produces a positive investment, while revenue-neutral car tax and free-tuition programs could produce a negative impact and a reduced investment.

STATE REVENUES:

Sales Tax Revenue: Under a ‘revenue neutral car tax repeal scenario, to partially fund the state’s $215 million in “Transfer” (reimbursements) to municipalities, and in order set the worst-case economic impact parameter, we assume an increase in “Sales tax” revenues. However, because a sales tax hike will negatively impact commerce and the economy, it will dynamically result in less sales tax revenue than the straight-line (or static) calculation, therefore the “Policy target” for sales tax increases must be higher than the needed revenues.

Conversely, under either budget reconciliation method for a 3.0% sales tax phase-down plan, the straight-line (static) calculated sales tax “Policy target” revenue losses are greater than the actual (dynamic) “Sales tax” revenue loss, because the sales tax cuts will spur more sales tax transactions.

Under a ‘spending cut’ approach, car tax reform would produce a very limited increase in “Sales tax” revenues, because of greater disposable income across the state.

The difference between the static and dynamic sales tax revenue projections is portrayed as the “Dynamic difference”

Personal Income Tax Revenue: Similarly, increased “Personal income tax” revenues are also assumed to fund the rest of  revenue-neutral car tax plan. However, because negative dynamic impact will lessen such revenues, a higher income tax “Policy target” is required.

Under the 3.0% sales tax plan, because of the thousands of new jobs created, “Personal income tax” revenues are projected to dynamically rise by between $304 million to $468 million, regardless of which budget reconciliation process is utilized.

Corporate/Business Tax . As with sales and income taxes, the negative statewide impact of a  revenue-neutral car tax plan that includes other tax hikes, may produce lower “Corporate/business taxes”. Under all scenarios, a 3.0% sales tax will always produce positive and significantly higher “Corporate/business tax” revenues.

Cigarette Tax, Other Taxes & Other Sources.  As with the personal and income taxes, the negative statewide impact of a  revenue-neutral car tax plan, may reduce revenues from “Cigarette taxes”, “Other taxes” and “Other sources”. Under all scenarios, a 3.0% sales tax will produce positive and significantly more revenues in these areas.

MUNICIPAL REVENUES: Additional municipal benefits from sales tax cuts will result from the increased retail and overall economic activity .

Business Property Tax. The stimulus of sales tax cuts would see many existing businesses expand and many other new business established. Cities and towns will likely see an expansion of its local commercial property tax base and will result in increased “Business property tax” revenues. While municipalities must comply with a 4% annual tax-levy cap, this larger tax-base will allow localities to reduce property taxes in other areas, potentially including the car tax.

Conversely, under a revenue-neutral car tax repeal plan, municipalities could actually see reduced municipal “Business property tax” revenues, due to the more potent impact of statewide sales and income tax hikes as compared with local property tax cuts.

In fact, the potential new municipal revenues from a 3.0% sales tax – on their own – could fund over half of the cost of statewide car tax repeal.

Municipal Sales Tax, Other taxes and Other sources of revenues:  Similarly, under a car tax repeal plan, municipal revenues in other areas could increase or decrease in limited amounts. Conversely, under any 3.0% sales tax scenario, these revenue areas would increase, potentially in a significant way.

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Center Supports Town of Narragansett Single-tier Property Tax Plan

FOR IMMEDIATE RELEASE: October 14, 2016

Narragansett’s Proposed Single-tier Tax Rate a Good First Step

Providence, RI — The RI Center for Freedom and Prosperity supports the proposed single-tier tax rate plan that will be decided at the Narragansett Town Council meeting on Monday, October 17.

The Center applauds the Town’s goal to create one of the best local business climates … in a state that has the worst overall business climate in the nation. The bi-partisan plan would significantly lower the commercial tax rate and slightly raise the residential rate to equal levels.

“If town families are to achieve a better quality of life, it is essential that more and better businesses, that create more and better jobs, have a better business climate in which they can thrive,” said Mike Stenhouse, CEO for the Center. “The positive benefits of this plan clearly outweigh the arguments against it.”

Currently, commercial properties pay up to 150 percent higher than the residential, leaving Narragansett as the only Washington County locality with a split rate.

Not only would a lower commercial rate spur local economic activity, but the single-tiered rate would eliminate the practice of pitting businesses against residential property owners when future tax policy is considered. The concept of tax policy that treats everyone the same, is a fundamental precept of American governance.

The slight increase in residential rates could be directly offset by taking advantage of a discussed “homestead exemption” for year-round, owner-occupied properties; this exemption has already received enabling approval from the General Assembly, and is in the works to be reviewed and decided upon in future Town Council sessions. Further, if the town does realize growth in the commercial business community, this could lead to reduced overall tax rates for everyone.

The plan would be even stronger, according to the Center, if the commercial rate would be lowered to the existing residential rate. This could be accomplished without raising the residential rate by cutting town spending by a few percentage points.
Additional commentary on Narragansett’s single-tier tax plan can be found on The Ocean State Current, the journalism and blog website for the Center.

NEW: Failing RI Report Card Grades Not Advancing Social Justice

FOR IMMEDIATE RELEASE
November 17, 2015

Non-Competitive Grades Harming Work, Mobility, and Opportunity for Rhode Islanders
Preponderance of Fs and Ds Should Signal Need for Change in Policy Culture

Providence, RI — The opportunity for upward mobility for many Ocean Staters continues to be hampered by a non-competitive business climate and onerous family tax burdens, as evidenced by the poor grades the State of Rhode Island received on the 2015 Report Card on Rhode Island Competitiveness, the fourth annual such report, released today by the Rhode Island Center for Freedom & Prosperity.

Burdened with public policies that discourage work and a productive lifestyle, the state’s poor grades in 10 major categories (two F’s, seven D’s, and one C) reflect a government culture geared to benefit special interest insiders, while at the same time promoting job-crushing and soul-crushing dependency among the general populace.

Raising even further alarm, Rhode Island ranked dead-last, overall, when compared with report cards from other New England states.

“This report card clearly demonstrates the wreckage that decades of liberal policies have wrought upon our state. These unacceptable grades should be a wake-up call to lawmakers that a government-centric approach is not producing the social justice and self-sufficiency that Rhode Islanders crave,” suggested Mike Stenhouse, CEO for the Center. “If we want to provide more mobility and opportunity for our neighbors and entrepreneurs, we must completely reform our public policy approach. We must learn to trust in our people and remove the tax and regulatory boot of government off of their backs by advancing policies that empower the average family with choices, that reward work, and that grow the economy.”

The two categories with F grades are Infrastructure and Health Care; the seven D’s are Business Climate, Tax Burden, Spending & Debt, Employment & Income, Energy, Public Sector labor, and Living & Retirement in Rhode Island; while Education received a C-. Among the 52 sub-categories evaluated, Rhode Island received 19 F’s, 24 D’s, 5 Cs, 3 Bs, and just one lone A.

In a related 1-page brief, the Center also analyzes report card trends over recent years as well as comparisons to grades for other New England states.

The RI Report Card, originally developed for the Center by a national economist, compiles into a single document the state rankings among key economic and social indexes, as published by dozens of credible 3rd party national organizations.

The 2015 report card, with citations, as well as reports from prior years can be downloaded at RIFreedom.org/RIReportCard.

Media Contact:
Mike Stenhouse, CEO
401.429.6115 | info@rifreedom.org

About the Center
The nonpartisan RI Center for Freedom & Prosperity is Rhode Island’s premiere free-enterprise research and advocacy organization. The mission of the 501-C-3 nonprofit organization is to return government to the people by opposing special-interest politics and advancing proven free-market solutions that can transform lives by restoring economic competitiveness, increasing educational opportunities, and protecting individual freedoms.

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2015 Report Card FAILS to Provide Equal Opportunity for Rhode Islanders

The Center’s 4th annual REPORT CARD demonstrates how RI’s political class continues to cater to special insiders, while depriving other Rhode Islanders of the opportunity for upward mobility, educational opportunity, and personal prosperity.

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