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Chafee Says No New Taxes in FY2014 Budget

Thursday, January 17, 2013

 

By far the most popular talking point of last night’s State of the State address and budget unveiling was the fact that Governor Lincoln Chafee’s proposed 2014 fiscal year budget does not raise taxes or fees.

While it might seem like ‘not’ doing something is ‘not’ news, the announcement by the governor is a pretty significant moment for his administration, particularly when compared to his first two initial budget presentations during this term.

In 2011, the governor sought to produce a total of at least $176 million in new tax revenue by lowering and broadening the sales tax as well as instituting reforms in business taxes to cover half of a projected $331 million deficit.
Chafee’s plan at the time called for the lowering of the state’s sales tax from seven percent to six percent and covered a whole host of new categories—including dry cleaning, beauty salons and recreational activities—for taxation as well as pushed Congress to pass legislation to allow the state to tax internet sales.

Interestingly enough, Chafee’s 2011 budget also called for a reduction of the state’s corporate tax from nine percent to seven percent over three years—the same idea harkened yesterday—but by and large his measures were met with resistance from a General Assembly resistant to raising taxes.

Fast forward a year and, in 2012, Chafee’s proposed budget again called for an increase in taxes, this time a total of $75.9 million in new taxes as well as another $17 million in rate increases, though the increases were pitched as a relief package to cities and towns.

Under the governor’s policy then, restaurants, taxis and limos, moving, storage, warehousing and freight services, pet services, car washes, the tobacco industry and bed and breakfasts would have all seen increased taxes.

Not surprisingly, a proposed meal and beverage tax proved to be one of the most controversial increases, leading to further rancor from lawmakers on Capitol Hill.

It’s no surprise, then, that Chafee’s decision this budget season to not raise taxes and/or fees has been met with positive feedback from even his most vocal opponents.

“I love that there is no tax increase and no fee increase,” said Representative Doreen Costa. “I’m the first one to clap on that and we’ll have to see where that goes.”

All in all, Chafee’s budget would increase the state’s overall budget to $8.2 billion but, he said, taxpayers would get a much-needed reprieve.

It makes sense, then, that he would base the rest of his budget around that milestone alone.

“We have avoided tax increases and are lowering the corporate rate through both good fiscal management and a strengthening economy,” he said. “As we move forward, it is important to keep investing in the building blocks of this progress – that is, investing in education, infrastructure, and workforce development.”

Already, some General Assembly members have praised the governor’s efforts in keeping taxes steady and have said this year’s proposal is vastly different than his previous two.

“This budget is a night and day difference from the last two,” House Minority Leader Brian Newberry said. “I can tell you having sat through this same address for the last two years, in my own mind, I rejected his prior budgets out of hand as did most the Assembly members, whatever their political leanings. This one here, and again the devil is in the details, and so I will have to look at it, there are probably a lot of things I’d like to see in the budget that aren’t there and I’m sure there’s going to be things in there that I don’t care for but this is something we can at least work with.” 

 

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