Commentary: Zero out sales tax to change R.I. game

by Mike Stenhouse. As appeared in the Providence Journal, March 4, 2013
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For perhaps the first time in recent memory, the Rhode Island General Assembly will consider legislation that could have a profound positive impact on the lives of virtually all residents and businesses in the state. Rhode Island families are being torn apart. Parents, children and siblings are being driven out of the state in search of good work or retirement at a more reasonable cost of living. Businesses struggle in our uncompetitive business climate. With some of the worst job outlooks and population trends in the entire nation, the Ocean State is in dire need of “out of the box” thinking to restore financial security and hope for a brighter future for our home state.

The recommendation by the Rhode Island Center for Freedom & Prosperity to eliminate the state’s 7 percent sales tax, which would bring shoppers and retail and construction jobs back, keeping our families and businesses intact and at home here in the Ocean State, has resulted in bipartisan legislation submitted last month in the Assembly.

A 0.0% sales tax would bring an economic boom to RI


Those who defend the status quo, though they themselves pledged that the economy would be their No.1priority for the 2013 legislative session, argue that we should be “boxed-in” by a demonstrably failed state budget.Think of the numbers 50-50-50-1. Depending on the index, Rhode Island ranks at or near: 50th in employment; 50th in population out-migration; and 50th in business climate — all because it ranks first in the category of redistribution-of-income policies. This makes the Ocean State the most anti-free-market, anti-family, anti-jobs state in the entire country. No wonder Rhode Island is in a death spiral, with fewer and fewer productive people to support an ever-increasing and burdensome budget.And it is this very budget that opponents of our sales-tax-repeal plan point to as reason not to create tens of thousands of new jobs, not to breathe new life into our economy and small-business sector, not to reduce the cost of living for every family (especially helpful at lower incomes), and not to provide local municipalities with $150 million in annual windfall revenue.But Rhode Island is not about numbers, or a budget, or government: It is about real people, with real lives, who suffer real consequences as a result of poor public policy. Dare to imagine a brighter future for Rhode Islanders, where public policy, for once, works in their favor.

Imagine the headlights on highways Route 95 and Route 195 jammed with traffic of shoppers and families coming into the Ocean State, instead of the tail-lights of those heading out.

Imagine the thousands of unemployed who will be able to earn a paycheck instead of a welfare check.

Imagine $900 million left in the pockets of area shoppers to reinvest in the local economy.

Imagine the new shoppers, higher revenues and profits, and lower compliance costs for local businesses.

Imagine Rhode Island businesses competing regionally and stepping to the plate without a proverbial 7 percent weight on their bats.

But the ruling class in Rhode Island has no such imagination. All its members can see is the $900 million in sales-tax revenue that might be lost from their prized budget; $900 million less that they can hand out to preferred insiders. This is not leadership but fear of upsetting the apple-cart by hiding behind the limitations of a failed, job-killing budget.

But lo, the Center for Freedom & Prosperity has crunched the numbers and found that the ruling class’s sacred $900 million obstacle is imaginary. In reality, our estimates suggest that it would take only $105 million in budget savings in fiscal year 2014 to implement this game-changing reform. The legislation on the table would eliminate the sales tax as of Oct. 1 of this year. That means the state would still cash in on the busy summer tourism months, even as the people and stores of Rhode Island see their holiday shopping dollars go further.

Then, if political leaders were serious about making the economy their No. 1 priority, they would apply last year’s budget surplus to help pay for repeal of the sales tax. And if the political class was serious about making jobs its number one priority, it would likewise freeze the 2014 budget at 2013 levels.

And finally, by realizing the huge projected increases in other taxes and fees because of the massive economic boom the state would see, just under $105 million in savings would remain to be found in the budget to put Rhode Island on a fast path to growth and renewed vitality.

Repeal of the sales tax is not a budget-busting reform policy by any stretch of the imagination. This is a win-win solution for the state of Rhode Island. Imagine that.

Mike Stenhouse is CEO for the Rhode Island Center for Freedom & Prosperity, a free-market public-policy think tank.

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