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R. Kelly Sheridan quoted in Providence Journal

Corporate tax-cut plan draws mixed response

Some say it would make R.I. more competitive; others question tying it to taxing online sales

By RANDAL EDGAR JOURNAL STATE HOUSE BUREAU

Chafee’s plan to reduce Rhode Island’s corporate tax rate if Congress allows states to tax online purchases got a mixed response Tuesday as state lawmakers sought public input.  Some people liked the idea, saying a lower corporate tax rate would make Rhode Island more competitive.  Others said the state should wait and see how much revenue the state would gain from taxing online purchases before changing any tax laws.  Still others questioned some aspects of the plan, or said the state needs to take a more comprehensive look at its tax competiveness.

Chafee’s plan, part of the $8.5-billion budget he has proposed for the fiscal year that begins July 1, would drop Rhode Island’s corporate tax rate from 9 percent to 6 percent, making it the lowest in New England.  The plan hinges on Congress, which means the rate would drop only if Congress allows states to collect the sales tax on purchases made through online and remote sellers such as Amazon and eBay.

Rhode Island lawmakers have already approved a plan to lower the state’s 7 percent sales tax to 6.5 percent, and increase its local meals and beverage tax from 1 percent to 1.5 percent, if the online sales tax passes. But Chafee’s new proposal, if adopted, would replace that plan.

Peter Marino, director of Chafee’s Office of Management and Budget, told the Senate Finance Committee that the governor believes the corporate tax reduction “would be a game changer for the state.”  “The state’s corporate rate of 9 percent is often identified as a barrier to a competitive business environment in Rhode Island,” he said. “It is among the highest in the region, it’s considered a disadvantage when competing in New England.”  “If successful in getting to 6 percent,” Marino said, “we would be right around the middle of the pack in the country.”  R. Kelly Sheridan, lobbyist for the Greater Providence Chamber of Commerce, applauded the idea, saying “whether or not we like it, the national rankings matter.”  But Kate Brewster, executive director of the Economic Progress Institute, urged lawmakers to wait until they know how much revenue the state would gain. Marino said it appears the gain would be somewhere between $40 million and $70 million but acknowledged those are just estimates.

Brewster also questioned economic benefits, saying research shows that cutting corporate tax has little impact on job growth.  Julie A. Gill, executive director of the Oil Heat Institute of Rhode Island, questioned a piece of the plan that would exempt businesses from paying the sales tax on electricity and gas, but not heating oil or propane.  “It is not fair to the heating oil dealers and propane dealers of the state, it’s not fair to the businesses that choose to use heating or propane,” she said.