Proposed Tax Cut Meant to Attract Businesses
Friday, May 28, 2010
“It’s a win-win for Rhode Island,” said Steven Monacelli, a partner at Restivo Monacelli, an accounting firm.
The key change, Monacelli said, was the elimination of the alternative flat tax and the lowering of the tax rate for top earners. “As soon as we knock the 9.9 percent down to 6 percent, we open the door for business to come,” he said.
While the flat tax rate is 6 percent in the current year, it applies only to a small group of people making around $400,000 or more and did not show up in business guides that compare the top income tax rates in the states, according to Monacelli. Instead, businesses trying to decide where to open or relocate just saw the top rate of 9.9 percent—which was among the highest in the country.
Now, those earning $125,000 or more, will be taxed at a rate of 6 percent.
Monacelli said the new tax rate for top earners will make Rhode Island more competitive with Massachusetts. He said the lower rate is key to attracting business owners to the state—something he said will benefit everyone. “This is an economy that is driven by the private sector,” Monacelli said. “The people making in excess of $300,000—they’re the ones, for the most part, driving private sector growth which creates jobs and reduces unemployment.”
Another major change is in the estate tax, commonly known as the death tax, according to Ed Mazze, a business administration professor at the University of Rhode Island.
He said the bill would exempt the first $1.5 million of an estate from the tax, instead of the current amount of $800,000—meaning that those whose estates are worth less would not pay the tax at all. “People can do better estate planning in terms of what they have and what they can invest, instead of paying taxes,” Mazze said.
But not everyone was happy with the proposal. Ocean State Action, a coalition of left-leaning groups, praised the repeal of the alternative flat tax, but opposed the cut in the top tax rate.
“This proposal would actually be a net revenue loser that would disproportionately cut taxes for the wealthy,” said Daniel Bass, a spokesman for the organization.
“It is also wrong for a family making $130,000 to pay the same top rate as an individual earning millions or even tens of millions of dollars a year,” Bass added. “We need to move away from our over-reliance on property taxes and towards a more-balanced system, and this proposal moves us in the wrong direction.”
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