Governor’s Corporate Tax Cut Plan Not a Game Changer

Based on analysis by the Rhode Island Center for Freedom & Prosperity, Governor Chafee’s proposed reduction in the corporate tax rate from 9% to 6%, if implemented as a stand-alone policy, would have a very modest positive impact on the Rhode Island economy, despite having a more notable effect on the state’s national rankings*. When this tax reform is then offset by an increase in a national internet tax, the results are likely to become negligible or even negative.

At face value, according the Center’s RI-STAMP tax modeling tool, the proposed corporate tax cut would result in a loss of $72 million in general revenues and produce only 240 private sector jobs. With the stated objective of paying for the corporate tax cut with revenues from a new internet sales tax**, which could mean up to an additional $70 million tax on Rhode Island shoppers, the combined effect means the state could actually lose jobs and still see a substantial revenue loss.

“The internet tax – a new tax on top of already burdensome tax levels in the Ocean State – is a highly regressive tax that will hit virtually all Rhode Islanders directly in their pockets, and is likely to reduce economic activity far more than a corporate tax cut might increase it. Do we want to simply improve our state ranking or do we want to provide real jobs for our residents,” questioned Mike Stenhouse, CEO for the Center. “This habit of taking a step forward only when we also take a step backward gets us nowhere. To produce game changing results for our state, revenue-neutral ideas will not get the job done; significant revenue and spending cuts must be implemented.”

The Center’s sales tax reform recommendations, conversely, could produce tens of thousands of new jobs with a lower budget impact.

* http://www.providencejournal.com/breaking-news/content/20140205-chafee-plan-to-reduce-states-corporate-tax-rate-gets-mixed-response.ece

** The RI-STAMP modeling tool does not directly allow for calculation of a national internet sales tax, therefor specific revenue and jobs projections were not included in this portion of the post. With the best simulation we could conduct, RI-STAMP projected a combined effect of these two tax reforms to produce a net loss of $56 million in state revenues and a loss of 879 private sector jobs. For reasons described below, our Center does not anticipate the negative effects to reach these levels, although it is highly probably that the positive effects of a reduction in the corporate tax could be more than offset by the negative effect of the new internet sales tax.

The high-end figure of $70 million in ‘new’ internet sales tax revenues for the state was used and, given that that money has to come from somewhere, that figure was “added” as an additional tax burden to the general state sales tax category in the RI-STAMP modeling tool. It was further assumed that the Internet sales taxes paid by Rhode Islanders to out-of-state retailers and those sales taxes paid by out-of-state shoppers to Rhode Island retailers would level out; meaning that the new revenues to the state would in essence be paid by Rhode Islanders. Also, given that a national internet sales tax would not provide Rhode Island with a competitive advantage or disadvantage, the negative impact on its economy would likely be less than the STAMP projection, which is designed to be  comparative modeling tool.

Stenhouse Sales Tax Commission Testimony (1/23/14)

January 23, 2014

TO:                 Joint Sales Tax Study Commission #6

FROM:           Mike Stenhouse, CEO

SUBJECT:      Prepared Testimony Remarks

Good evening. I’d like to first thank the Commission members for their hard work and open minds when it comes to creating jobs and renewed opportunities for Rhode Island families via a new growth economy.

Today, Chairman Malik asked this Commission to consider how to manage the budget implications of potential sales tax reform in Rhode Island. So today, we’re going to talk about revenues and spending. However in light of the earlier, it may be appropriate to review why we’re here.

In fact, perhaps the Governor framed the debate best by suggesting in his recent State of the State address, in effect, that government should play an aggressive role in shaping people’s lives. As we discussed at the last hearing, our sales tax issue all boils down to a larger, philosophical approach as to the proper level of government intervention in our personal lives and in the conduct our business. Indeed, this sales tax issue in Rhode Island has evolved to become part of a larger national debate about “income inequality”.

If we as a state believe that the status quo is hunky-dory for our state, and that generous government services that incentivize people to live a life of dependence is good, then yes, you’ll be inclined to think that more of the same philosophies, policies, and modeling tools utilized, to fall to where we are now, should be what we continue to utilize in the future. The state’s REMI tool falls in this category.

If you believe like we do, that the status quo is the enemy of our future, that every person should have the opportunity to become self-sufficient and thrive, then you’ll be inclined to look for a new approach, and new solutions. Our Center’s RI-STAMP tool represents that new way of thinking.

The old way or a new way? … that is the question. Preserving the current system, or helping our state’s residents?

The testimony you just heard regarding the state’s tax modeling tool, REMI, should not cause you to take your eye off the ball. The question at hand is not which modeling tool is better; rather, the critical question is whether or not the state’s recent economic troubles and its own modeling tool are credible enough reasons to dissuade you from considering the bold NEW reform our Center is recommending and that virtually every witness you heard from supports.

It should be clear to everyone that what we’re doing now – the old way – is NOT working. And virtually everybody outside of the system understands that. The handout we provided to you summarizes the testimony you heard from our prior six hearings. For those of you watching at home, this handout can be viewed on our website – RIFreedom.org – I believe it’s the second item down, called “Testimony Highlights.”

We all heard overwhelming testimony in support of reform from dozens of real residents and real business owners. The only pushback you’ve heard, are from those connected with the                                                                                      system. Again I ask, is good government about preserving the system or helping people?

Taking a step back. Over the past year, as our Center has been raising awareness about the many benefits of repealing the sales tax, I have, admittedly been astounded by the lack of concern about how those benefits might improve the lives of real people. The first reaction, and the disqualifying consideration, right off the bat, for many, is … well how do we make up all the revenues? To the political class – “revenues” are more important than creating opportunities for our fellow Ocean Staters. Our Centers believes otherwise … do you?

When it comes to the impact on the state’s budget regarding sales tax reform, or any tax reform for that matter, I am here to proffer that current levels of spending are hurting our state. To move forward with major tax reform, we must first accept that “revenue-neutral” policies – or limiting ourselves to simply reshuffling the chairs on the deck – are not likely to produce anywhere near the desired economic and jobs boost our state so clearly needs. If, after years of increasing revenues and spending – via taxation – to levels that have caused wreckage to our economy … if, we want to reverse course and actually do something productive that creates economic growth, then it only makes sense that we also must reverse course when it comes to levels of government spending.

If we want economic growth and more shoppers and businesses in this state … as you heard from witness after witness before this very Commission… we must have lower levels taxation, and give them a reason to come to RI. To lower tax levels to be attractive in this regard, we must necessarily lower levels of state spending. We can do this. It is in within the power of this Commission to recommend this. It is in the power of the General Assembly to implement your recommendations … it is allowed!

Across the nation in 2013, economic growth became a top priority for dozens of states; in fact, in 2013, 18 states actually cut taxes! They were allowed to … and they did. In Wisconsin, Governor Walker has proposed $800 million in tax cuts.

A few years ago, Rhode Island, along with Michigan and Indiana, was among the three worst states, nationally, when it came to recovering total jobs, as compared with pre-recession levels. Two states decided to take bold action to change that bold dynamic … yet one state did virtually nothing. Want to guess what state that was? Michigan and Indiana became Right To Work states. Separately, even a perennial high tax state such as NY is now actively promoting tax-free zones to attract and expand businesses. Rhode Island’s opportunity to remain competitive, in its own way, is significant sales tax reform. Will we do it?

Yet there are many for whom the preservation of the size government spending is a more important consideration. Indeed, it is the overall mission of our Center to provide a very different perspective, to think outside that box, and to inject new ideas into the public policy debate, to challenge that status quo thinking.

However, those who defend the status quo see our Center as being disruptive to a political process that has an insatiable appetite for more of our money. We believe a healthy democracy necessarily means rigorous debate. If our Center’s advocacy is seen as disruptive, then so be it … we just see it as a debate. We believe our state needs a new public policy culture. But the status quo is firmly entrenched in our state.

And so far in 2014, we have heard nothing but the same old ‘reshuffling of the chairs on the deck’ from our political leaders.

And what is the status quo that they’re defending? Revenues – on a piece of paper. It seems it’s always about spending. Instead of looking to enhance the well-being of Ocean Staters, our government looks at us as nothing more than ATM machines … to serve the government’s priorities. It is this policy culture that must be changed. It is allowed, and today, you have the power to suggest a bold new step for our state.

Rhode Island is not defined by the amount of money that can be extracted from its residents and businesses, nor by a number at the bottom of a spreadsheet. Rhode Island is not about the size of its government. Rhode Island is about the hopes and dreams of its people – real families who are looking improve their futures through increased opportunities for prosperity.

The status quo that we oppose is all about preserving the system. The reforms we advocate for are about real people –and  job opportunities – and about preserving Rhode Island as home to more and more families and businesses.

You may recall that in my first testimony to this committee in September that I showed you a few charts to keep in mind. Allow me to review:

  • This first chart is what the status quo system is about … ever increasing levels of spending, 25% higher than what inflation and our meager population growth would otherwise dictate.
  • This next chart depicts just one part of the unintended consequence of that approach – showing Rhode Islanders flocking out of our state to neighboring counties in MA and CT to escape to lower  tax burden states. Not because of weather.
  • An this final image portrays the real-life effect … fewer and fewer people at grandma’s dinner table.

A report in today’s ProJo showed that the Census Bureau determined that another 3,922 Rhode Islanders moved out of our state last year. Cutting the oppressive levels of state spending and taxation that caused this undesirable out-migration is possible. We are allowed to do it.

(NOTE: at this point, the testimony was interrupted and not allowed to be completed in its entirety. Only the non-italicized content below was later spoken to the Commission)

 Our Zero.Zero report and recommendation is clearly a departure from the current way of thinking. We intended it to serve that very purpose. And we used a tool, STAMP, that offers a different perspective on how to impact a state’s economy – has the current perspective worked?

 I’d like to repeat what I said at the last hearing: RI is the #1 state in the country when it comes to government spending in the form of “income redistribution”. In theory, if government spending is indeed a stimulus to a state’s economy, and if RI has been doing this at a higher level than most other states, then it would stand to reason that RI should have one of the nation’s best economies.

 Sadly, however, Rhode Island’s reality clearly suggests that this formula of high spending has not worked for our state. As Commission members, it’s up to you to decide whether or not continuing with this same approach will work best for our state’s future. Or whether a new course is warranted.

 It is the position of our Center that instead of making “government revenues” as the state’s number one priority, that we should consider the well-being and future of the taxpayers and residents of our state as paramount! How can we possibly justify limiting their dreams of a brighter future, solely in order to expand the system and the amount of money the state collects and spends?

 Let me share with you a vision we have that that new approach might create. Instead of the seeing the tail-lights of our loved one who are leaving our state, imagine the headlights of cars on I-95 jammed with the traffic of family members, entrepreneurs, investors, and shoppers streaming over the border into Rhode Island. Imagine the parking lots of RI retailers splattered with cars with MA or CT license plates, and, of the extra workers those retailers are able to hire.

 This is what our Center’s sales tax recommendations are all about, as well as putting money back in the pockets of every single individual and business in the state, and for creating thousands of new jobs so that they can have new opportunities and mobility to move up the income ladder and improve their lives.

 In December, a new study showed that while homelessness is decreasing nationally, it has actually increased in Rhode Island. Clearly, increased levels of spending have not worked for those families and individuals in our state.

 Our unemployment rate, though better overall, is not keeping pace with our New England neighbors or the rest of the nation? In fact, we are dead last. Is this acceptable? Is this government working for us?

In fact, even State Tax Administrator, David M. Sullivan, said in November in the ProJo that the recent liquor/wine tax cuts should help to spur sales and boost the state’s economy at an important time for retailers. Why would this effect not be the same across all industries if RI were to obtain a competitive sales tax advantage via its repeal?  

 So I ask: What should we be more concerned about: keeping firmly to arbitrary government spending levels? Or providing real opportunities for families in need and putting them back at real family dining tables?

 If we want out-of-the-box solutions, then we must not box ourselves in by considering only revenue-neutral options.

 The future of Rhode Island families can no longer be held hostage by a bloated state budget. You heard testimony from a national tax expert who said that RI simply does not have the tax base to try to pay for all the services currently on our books. Yet we keep trying to serve more people and spending more and more.

 We believe that our state has been doing it precisely backwards. We have to grow our state’s tax base, by creating an environment where more people will choose to make RI their home, not further burden those who remain.

 In our view, the state budget should be reflective of the goals and aspirations we set for ourselves as proud and aspiring Rhode Islanders … it should not serve to limit those dreams. Our spending priorities must be aligned with advancing our overall well-being … not advancing government to our overall detriment … government spending must be “right-sized”.

 So I ask you to again consider the critical question … the old way or a new way? Should this Commission be dissuaded from supporting potential game-changing policy reforms, such as repealing the sales tax, simply because it’s different from our current failed approach? Or because it is not a revenue-neutral solution?

 In the end, it is up to you to recommend which course will best work for Rhode Island. It’s time to dare to buck the system and forge a new future for our state. It is allowed.

 With regard to specific recommendations from this Commission, our Center hopes that you will decide to take the boldest action by repealing the sales tax entirely, down to Zero.Zero %, and creating the most jobs. Note that we propose to implement this reform as of October 1, so as to spread out the budget impact over two years, and realize one quarter of sales tax revenues in the next fiscal year.

 Think of the low-income families who will keep more of their money in their own pockets and who might find new job opportunities because of the new growth economy.

 Think of the small business owners and restaurants who will no longer have to struggle to comply with the unfunded mandate that they collect taxes on behalf of the state, or spend thousands of dollars in time an legal fees when trying to settle a dispute with the state.

 Think of the cities and towns that will collectively realize over $100 million in new commercial property tax revenues.

 And, for those of you who will participate in this election year, think of how voters will reward you when you support an initiative that will save money for every single family and business in the state.

Something I neglected to mention last hearing and that I ask you to keep in mind, is that any sales tax reduction plan – that does not bring the rate all the way to 0.0% – does little, if anything, to lessen the business compliance costs of this unfunded mandate on retailers, restaurants, and other businesses that have a retail sales permit. Nor can any budget savings be realized through a reduction in the size of the government apparatus designed to audit and collect sales tax revenues.

Any sales tax rate above 0.0% would likely require just as much government infrastructure and just as many compliance burdens for businesses as the current 7% rate.

 A recent report cited Rhode Island as being out of compliance with its tax collection on the recently enacted sales tax on high-end clothing. Repealing the sales tax entirely eliminates these unnecessary complexities and costs of collection, and also puts all RI industries on a level playing field, and will end future nonsensical debates about which industries to tax and which to leave alone.

Our Center additionally suggests two other related recommendations be considered by this commission: first, that a comprehensive review of existing penalties and interest on back sales tax owed be conducted to determine if those statutes are making it overly difficult for businesses to remain open; second, that with sales tax reform that adjustments be made to the current 4% tax levy cap on cities towns so as to allow them to realize the organic revenue growth they will see from a lowered sales tax.

For the first time in decades, our state has the opportunity to take a major step in a new public policy direction, and send a signal to Rhode Islanders that their government places their well-being as top priority.

 In Rhode Island in 2014, this Sales Tax Repeal Study Commission represents the only hope to take to take a major step in a new direction. Rhode Island needs to keep pace with other states. Repealing or rolling-back the sales tax appears to be the only significant economic development policy idea on the table for the entire 2014 legislative session …not only is this something we are allowed to do, but that we must do

The budget can be amended to allow for this, if we have the foresight and take the proper steps to plan how to do it. In this regard, I’d like to introduce our Center’s research director, Justin Katz, who will take you through some of the budget considerations in our original report. Justin will also suggest revenue and spending guidelines that may be helpful to you in determining how the budget may be flexibly managed if significant sales tax reforms are implemented. Thank you.

Paying for Sales Tax Repeal

[button url=”http://www.rifreedom.org/wp-content/uploads/RICFP-payingforit-012114.pdf” target=”_blank” size=”small” style=”royalblue” ]Download report (PDF)[/button]

Throughout the autumn and winter, the Special Joint Legislative Commission to Study the Sales Tax Repeal has been investigating several aspects of the proposal submitted as legislation last session by Representative Jan Malik (D, Barrington, Warren).  Having addressed pros and cons of eliminating the sales tax, as well as estimates of its effects and alternative approaches, the commission arrives at the question of how the state could adjust its budget in order to implement the plan.

Ultimately, bare numbers will have to be hashed out as the Rhode Island House and Senate Finance Committees piece together a budget for fiscal year 2015.  But with a view toward developing a framework within which those numbers can be fit, the Rhode Island Center for Freedom and Prosperity proposes a strategy for considering the reform.

In this new brief, the Center also highlights some areas of budget savings and uses its RI-STAMP model to compare Governor Chafee’s proposed corporate-tax reduction and business energy sales tax exemption with other possible tax reforms, including the elimination of the sales tax and reduction of the sales tax rate to 3%, among others.

The Center estimates that the governor’s plan would produce 540 new private-sector jobs, at a cost in state government revenue of $143,352 each.  By comparison, a 0.0% sales tax rate would produce 25,426 jobs, at a cost of $12,298 each, and a reduction of the sales tax rate to 3% would produce $13,735 jobs, at a cost of $3,500 each.

[button url=”http://www.rifreedom.org/wp-content/uploads/RICFP-payingforit-012114.pdf” target=”_blank” size=”small” style=”royalblue” ]Download report (PDF)[/button]

Sales Tax Commission: Testimony Highlights

Stenhouse testimony from January 23, 2014– the testimony that was shut-down by commission members who didn’t want to hear the truth.

The Center informally compiled highlights from the first six Sales Tax Commission Hearings. Overall, every grassroots person and business owner who testified was in support of repealing or dramatically rolling-back the sales tax. Only insiders from the political class were opposed.

See the document here, which also provides detailed projections of the 0.0% and the 3% scenarios.

QUESTION: who should our government serve? The insiders or the people?

Center Defends Zero.Zero Report at Commission Hearing

A employee of the RI Department of Revenue, also a member of the Special Joint Legislative Commission to Study Repeal of the State Sales Tax, provided lengthy testimony at the December 3 hearing that questioned the Center’s Zero.Zero report and the modeling tool the Center utilized (STAMP) in making its jobs and revenue projections.

CEO Mike Stenhouse provided a rebuttal and also introduced a 3% sales tax scenario during his testimony.

* Read Stenhouse’s prepared remarks here …

* Watch the Capitol TV video here … http://ricaptv.discovervideo.com/embedviews/vod?c=all&w=640&h=480&s=1# Stenhouse testimony begins at the (115:45) mark. Note if link takes you to a generic page, find video in the menu from 12/3/2013.

– At the (134:20) mark the state employee says that … “It’s not a question of are we doing the right thing, or how’s that worked so far, etc …”. Really?

Zero.Zero and the Municipal Property Tax Cap

At last night’s meeting of the Special Joint Legislative Commission to Study the Sales Tax Repeal Act of 2013, Director of Revenue Analysis in the Rhode Island Department of Revenue Paul Dion stated that municipalities would be prevented from realizing the increase in local revenue that the RI Center for Freedom & Prosperity’s RI-STAMP model projects by the cap that state law places on local property tax levies.*  This is an issue that the Center investigated for our testimony on the bill, last legislative session.

The most important point in response is that Dion’s insistence that municipalities would have to forgo revenue “under current law” is largely irrelevant.  Under current law, businesses must collect a 7% sales tax.  In other words, an unprecedentedly large shift in current law would be necessary in order for municipalities to see those increases, anyway.  A relatively minor addendum to allow expansion beyond the tax cap would be a simple adjustment after the fact.

The General Assembly could make that adjustment as part of the law, creating a one-time waiver of the cap for economic reasons, or it could make the adjustment during the next legislative session, when municipalities have had a chance to review their numbers for the next year’s budget.  The legislators could also develop different language depending on their priorities.  Requiring cities and towns to seek dedicated legislation for each increase would provide the greatest protection for taxpayers; allowing the Division of Municipal Finance greater leeway in granting waivers would provide significantly less protection for taxpayers, but place less burden on local officials.

Beyond the possibility of new legislation, however, Dion’s objection made no reference to the different sources of local revenue or to the allowances already in the law for exceeding the tax cap.

According to the regulations that the state Division of Municipal Finance has implemented, the tax cap applies only to the property tax levy.  Regulation 2.08 explicitly excludes “licenses and fees” and “other miscellaneous municipal revenue” from that calculation.  Removing such items from the RI-STAMP projection leaves $117.96 million of the projected increase that would actually be subject to the cap.

The same regulation also lists the various sources of state revenue that should not be counted under the cap, which includes “meals and beverage tax distributions” (representing a sales tax).  Combined with state General Law 44-5-2(d)(1), which allows a municipality to exceed the cap if it “forecasts or experiences a loss in total non-property tax revenues,” this means that the cities and towns could exceed the cap by any amount that the state reduces aid directly because of the eliminated sales tax, or any other amount that the state determines to be advisable as part of the tax reform.

RI-STAMP estimates the direct loss in sales tax revenue to municipalities at $14.41 million, which would bring the amount of the overall projected increase subject to the cap down to $103.55 million.

Additionally, under General Law 44-5-2(d)(4), a city or town can exceed the tax cap if it experiences “substantial growth in its tax base” that necessitates new or additional municipal services.  There would be some nuance, here, depending on the degree to which the growth is related to new construction, but there would likely be significant room to maneuver in the budget.

Finally, municipalities could choose, rather than exceed the cap, to pass on the benefit to residents in the form of property tax relief.  Put in budgetary terms, the cities and towns would be making tax revenue expenditures that are not subject to the tax cap, because they reduce the tax levy, rather than expand it.

Putting some numbers to the analysis, data on the Municipal Affairs Web site (collected last spring for the purposes of the Center’s testimony**) projected FY12 property tax revenue for all cities and towns at $2.1 billion.  Applying the STAMP increase that is subject to the cap to that amount suggests an increase of 5.58%.  (That’s a high estimate, because levies have grown since then.)  Assuming all cities and towns exceed the cap by the lost sales-tax revenue, the increase would be 4.90%.

The Center’s recommended approach would therefore be for Rhode Island’s cities and towns to take the windfall of a one-year increase of property taxes at the state cap, plus the amount needed to adjust for lost sales tax revenue, and then to reduce their property tax rates in order to provide the remaining $19.02 million dollars as tax relief for residents, who are still struggling to recover from the recession and subsequent lack of growth.

 

* These calculations assume instant implementation of Zero.Zero with the new fiscal year in July. The actual legislation submitted last year put implementation off until October, which would likely reduce the first-year property tax levy increase.

** A quick review this morning did not confirm this number, but it is presented here for illustrative purposes only.

3% Sales Tax Rate May Provide Best Value

Would other sales tax reduction scenarios be more politically viable? Read our new report, which shows that a 3% sales tax rate produces the most jobs at the lowest budget investment per job.

[button url=”http://www.rifreedom.org/?p=9903″ target=”_self” size=”medium” style=”royalblue” ]Report: Alternative Sales Tax Cut Scenarios[/button]

Alternative Sales Tax Reduction Scenarios

Download report (PDF)

Notes

In November 2013, members of the Joint Legislative Commission to Study Repeal of the Rhode Island State Sales Tax requested that the Center summarize sales tax reduction scenarios, compared with the Zero.Zero plan under review.

Compliance costs for businesses, it is important to note, are not eliminated in any scenarios that do not eliminate the sales tax. The unfunded mandate of identifying, calculating, charging, collecting, reporting, and remitting sales tax revenue to the state, as well as costs for bookkeeping, accounting, and legal services, would remain.

Compliance costs would theoretically be the same with a 1% or a 7% sales tax. Furthermore, businesses would still be subject to penalty and interest charges on any past due taxes owed, maintaining an obstacle to keeping their doors open.

Highlights

The charts and table in this report display some of the more critical aspects of alternative sales tax reform scenarios. Significant findings include:

  • Sales tax reductions create the most jobs and the lowest budget “investment per job” compared with income and corporate tax reforms.
  • In all sales tax reduction scenarios except full repeal, the state will directly realize a dynamic revenue boost from increased sales volume.
  • A 0.0% sales tax rate creates the most jobs but requires the largest overall budget investment.
  • A 3.0% sales tax rate yields the most value, with the lowest state-budget investment per job and a net revenue gain, with municipalities included.
  • Phasing out the sales tax produces a similar number of jobs, but suppresses the dynamic increase in other tax revenue.

Media Release: December 2, 2013

Providence, RI — The Rhode Island Center for Freedom and Prosperity published today a new report – detailing alternative sales tax reduction scenarios – in advance of Tuesday’s hearing of the Special Joint Legislative Commission that will meet for the sixth time at the State House to evaluate repeal of the state sales tax. At the request of the Commission, the Center analyzed a number of sales tax cut options, to be compared with its original Zero.Zero plan to bring the sales tax to 0.0%. All sales tax cut scenarios will have the effect of saving money for every family and business in the state and will create thousands or tens of thousands of new jobs.

In the new report, alternative sales tax rates and phase-out options are explored; and the effect of sales tax reform is compared with other tax reforms; also. The report shows that a 3% sales tax rate would produce up to 14,000 new jobs, about 11,000 less than if the tax was eliminated, but would do so with the lowest budget investment per job.

“Because we need the jobs, our Center is still recommending complete repeal. However, the 3% scenario may be a good compromise for those concerned with the state budget”, said Mike Stenhouse, CEO for the nonpartisan Center. “Importantly, though, any partial sales tax cut scenario does not lower the cost of compliance for this unfunded mandate on the business sector”.

The report includes multiple charts and tables of the various scenarios, including a detailed jobs and revenue projection of the 3% scenario as compared with the Zero.Zero plan. Stenhouse will provide further details about the report’s findings at tomorrow’s Commission hearing.

Download report (PDF)

Center Testifies at Sales Tax Repeal Commission Hearings

Below are copies of remarks from CEO Mike Stenhouse at the Joint Legislative Commission Hearings that began in September of 2013:

October 29 Hearing:  2013-Oct29-Stenhouse-CommissionTestimony3

    • Don Russell “Must See” Video below: how an over punitive sales tax penalty process shut his business down

October 21 Hearing:  2013-Oct21-Stenhouse-CommissionTestimony2

September 29:  2013-Stenhouse-CommissionTestimony1

0.0Means

0.0% Sales Tax States: How Do They Do It?

See Testimony at Special Joint Legislative Commission to study repeal:  http://ricaptv.discovervideo.com/show/watch?id=702&t=1

Download Full Report (PDF)

Highlights

  • Non-sales-tax states have higher revenue per capita than Rhode Island in certain key areas, without necessarily taxing at a higher rate.
  • The overall tax structures of non-sales-tax states do not rely on high rates in multiple categories.
  • Despite Rhode Island’s high taxation in all available categories, revenue in non-sales-tax states proved more resilient than in RI during the economic crisis, falling less and recovering more quickly, at and above the national average.
  • Non-sales-tax states manage to spend more per capita on critical government activities than RI, such as infrastructure and education.
  • The exception, where non-sales-tax states reduce their spending relative to Rhode Island, is in social welfare/wealth redistribution.
  • Non-sales-tax states have all seen net taxpayer migration from other states to them; Rhode Island has gone the other way.
  • The employment situation is healthier in non-sales-tax states than in Rhode Island.
  • Studies show residents will cross borders to shop in states without sales taxes.
  • The high population density across Rhode Island’s borders is likely to amplify the benefit to the state.