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.

boston-neck-rd-narragansett-ri-af1

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.

F

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.

[button url=”http://rifreedom.org/RIReportCard/” target=”_self” size=”medium” style=”royalblue” ] 2015 Report Card [/button]

BudgetBandAid

CENTER’s STATEMENT on GOVERNOR’s 2016 BUDGET PLAN

FOR IMMEDIATE RELEASE
March 13, 2015

2016 Proposed Budget Does Not Address Major Problems

No Game Changing Economic Ideas
Does Not Address Long Term Structural Deficits
Continued Special-Interest Spending

Providence, RI — Governor Gina Raimondo’s proposed FY-2016 budget plan provides no game-changing ideas to boost Rhode Island’s stagnant jobs market and overall economy and does little to improve the state’s poor-rated business climate or to address long-term structural budget deficits.

By shifting money from certain side funds to the general fund and by borrowing money from the future via risky re-financing schemes, the Center rates the plan as a temporary band-aid approach, instead of major steps towards a long-term solution.

“Despite years of Rhode Island experiencing negative results, this budget continues and expands the state’s practice of assuming that government knows best, and that a few insiders in back rooms can solve our problems better than the rest of us can,” said Justin Katz, research director for the Center. “From tens of millions of dollars in phantom ‘trust us’ savings to millions more poured into slush funds for centralized economic development to a scary new ‘statewide property tax,’ several back-flips backwards overwhelm the few positive policy steps forward.”

The plan’s government-centric approach toward economic development that favors specific industries is merely an extension of the same, failed public policy approach that is responsible for putting Rhode Island into its current economic rut. The Center, instead, recommends broad based tax and spending reductions as the primary means to boost the economy.

Other than vague goals to reduce Medicaid and state personnel costs, multi-hundred million dollar deficits are still projected in future out years.

OTHER OBSERVATIONS. The Center soon plans to publish a policy brief that will povide a more detailed analysis of the budget plan, but today also makes the following observations:

  • The plan gives government more power in attempting to orchestrate economic development, and is a further departure from proven free-market principles
  • The plan continues the practice of new special interest spending programs at the expense of the average Rhode Islander
  • The new state property tax fee is a slippery slope that could lead to this tax being applied to lower valued properties in the future
  • The increased hospital fee and health insurance premium fees will likely result in more costs being passed down to consumers and will likely also lead to health insurance premium hikes
  • The vendor/supplier corporate tax credit idea is a handout to special interest big corporations
  • New pre-K, full-day K, and construction spending ideas are handouts to special interest unions
  • The new rental taxes will be a drag on our state’s vital tourism industry, especially harming smaller entrepreneurs
  • The higher cigarette tax will likely lead to even greater “black market” activity, with the state is unlikely to meet the increased $7+million revenue expectations
  • The increased town tipping fees to RI Resource Recovery could lead to increased property taxes in those towns

Center Rates Fung Sales Tax Reduction Plan

October 14, 2014 – Providence, RI: The Rhode Island Center for Freedom & Prosperity released today a scoring-summary of the sales tax reduction plan offered by gubernatorial candidate, Allan Fung, who proposes to gradually reduce the state’s sales tax rate to 5.5% over the next four years from its current level of 7%.

According to the Center’s economic modeling program, RI-STAMP, the Fung plan would produce the following ‘dynamic’ results for the Ocean State job market and for state and municipal budgets. As compared with current baseline projections over the next four years …

A 6.25% sales tax rate in year-1 would produce 2043 new private sector jobs; would require $19.9 million in state budget savings; and would add almost $17 million statewide in new municipal revenues

A 6.00% sales tax rate in year-2 would produce  2663 new private sector jobs; would require $28.3 million in state budget savings; and would add almost $23 million statewide in new municipal revenues

A 5.75% sales tax rate in year-3 would produce 3250 new private sector jobs; would require $36.5 million in state budget savings; and would add over $29 million statewide in new municipal revenues

A 5.50% sales tax rate in year-4 would produce 3804 new private sector jobs; would require $46.3 million in state budget savings; and would add almost $36 million statewide in new municipal revenues

completesolutionFor years, the Center has been advocating for an immediate repeal of the sales tax, or a major reduction to 3%, as the most cost-effective way to produce tens of thousands of new jobs and to provide a major boost to Rhode Island’s stagnant economy. According to the Center’s RI-STAMP projections …

A 0.0% sales tax rate would produce 25,426 new private jobs; would require about $313 million in state budget savings; and would add about $150 million statewide in new municipal revenues.

A 3.0% sales tax rate would produce 13,424 new private jobs; would require about $47 million in state budget savings; and would add about $119 million statewide in new municipal revenues.

A detailed analysis of multiple sales tax reduction scenarios, with corresponding RI-STAMP projections, can be found here.