State Report: Abolishing the Sales Tax, Fiscal Cliff & Increasing the Minimum Wage

With the New Year in mind, this week’s State Report centers on several policy changes that go into affect on January 1^st. Firstly, the state’s minimum wage workers will receive a slight pay raise next week, as the minimum wage will increase by 35 cents. Secondly, smokers are in luck because HEALTH is launching its new anti-smoking campaign just in time for New Year’s resolutions. Additionally, we look at how the looming fiscal cliff and how Rhode Islanders could be affected come January 1^st.

 

Also on the docket this week is the state GOP’s proposal to abolish the sales tax, as well as the newly released housing statistics for November.

 

 

Rhode Island’s minimum wage earners are set for a pay raise come January 1, 2013. The state’s minimum wage will increase 35 cents to $7.75, the first minimum wage increase in six years.

 

The state’s new minimum wage puts it 50 cents above the federal minimum wage, which was established under the Fair Minimum Wage Act of 2007. Rhode Island is one of 17 states whose minimum wage is higher than the federal requirement. That said, Rhode Island’s minimum wage workers still earn less than their Connecticut and Massachusetts counterparts, who earn $8.25 and $8.00 respectively. The highest minimum wage is the region is Vermont’s $8.46, while New Hampshire’s $7.25 is the lowest.

 

Gov. Lincoln Chafee first signed legislation increasing the state’s minimum wage back in June. Prior to the announcement, Rhode Island had gone the longest of all New England states without a minimum wage increase. According to state labor statistics, approximately 10,000 workers earn minimum wage in Rhode Island.

 

As of Jan. 1, the highest minimum wage in the country will be Washington’s $9.19 per hour.

 

 

U.S. Rep Jim Langevin is urging members of the U.S. House of Representatives to end their holiday recess early to work on the looming fiscal cliff. Langevin expressed his feelings in a letter on Wednesday sent to House Speaker John Boehner. The Rhode Island Democrat called the House’s decision to remain in recess “unconscionable.”

 

Speaking on behalf of his constituents, Langevin said that Rhode Islanders are “rightly frustrated” by Congress’ lack of urgency. Currently in his sixth term, the veteran representative stated that there’s “no legitimate reason” that a compromise shouldn’t be reached.

 

Although President Barack Obama ended his Christmas vacation early to resume fiscal cliff talks, House Speaker Boenher has yet to call lawmakers back to Washington.

 

If Congress and President Obama do not reach a deal before the end of the year, taxes will rise and federal spending will be cut significantly. Additionally, student loans may become more expensive, while university research grants and social service spending could be reduced dramatically.

 

According to President Obama’s National Economic Council, roughly the fiscal cliff in would negatively impact 400,000 middle class families in Rhode Island. Despite the NEC’s estimate, Politifact.com determined that the approximately 234,500 families would be affected, because the Obama Administration’s statistics included non-family households. Either way, Politifact concludes, “Without an agreement on tax reform, a lot of people are going to be affected.”

 

 

Rhode Island Republicans may push to end the state’s seven percent sales tax in 2013, according to The Providence Journal. House Minority Leader Brian Newberry (North Smithfield) said that he and other GOP leaders are looking to increase business productivity and that abolishing the state’s sales and use tax may do the trick.

 

The state’s sales tax, excluding taxes on gas, tobacco and alcohol, is expected to raise $887 million in revenue for the state in the budget year ending July 1. As for the lost revenue, Newberry argues that boosting other state taxes and cutting state spending would make up the difference.

 

“If I could have a net tax cut that would involve some combination of eliminating the sales tax, cutting state spending but raising the income tax, I'd be willing to look at that,” he said.

 

As to Newberry’s contention, Rhode Island was recently ranked 46^th worst in the country when it comes to taxes on businesses, according to State Business Tax Climate Index by the Tax Foundation. Specifically, Rhode Island earned low scores in most categories including corporate tax, individual income tax, property tax and sales tax.

  

The number of single-family homes and condos sold in Rhode Island jumped dramatically in November. According to the Rhode Island Association of Realtors, single-family home sales jumped 43 percent compared to November 2011, while condo sales increased by 37 percent. Although single-family home prices remained steady, condo prices increased by about 25 percent, to a median of $205,000.

 

Despite the positive news, RI Association of Realtors President Victoria Doran argues that the fiscal cliff could hinder housing market gains. In fact, the approaching fiscal cliff and the possibility of eliminating the home mortgage interest deduction on second homes could hurt the state’s recovering housing market.

 

On a national scale, contracts for U.S. home resale have reached a 2.5-year high in November, suggesting increased strength in the economy. Additionally, the National Association of Realtors’ Pending Home Sales Index for November, which is based on signed contracts, showed a 1.7 percent increase to 106.4 percent – the highest level since April 2010.

 

HEALTH launches new anti-smoking campaign

 

With 2013 right round the corner, Rhode Island Department of Health (HEALTH) is launching a new anti-smoking campaign designed to help Rhode Islanders keep their New Year’s resolutions to quit smoking. Unlike some anti-smoking efforts, this campaign encourages smokers to quit by presenting a series personal stories from local individuals whose lives have been negatively affected by smoking.

 

Although HEALTH may be up against billions of dollars in tobacco marketing money, Michael Fine, MD, director of HEALTH, remains hopeful.

 

“Quitting smoking is tough, but the more times that a smoker tries to quit, the more likely he or she is to ultimately be successful,” said Fine. “Smokers should know that services to help them quit are available and that HEALTH supports them in making a commitment to kick the habit. We are up against $10 billion of tobacco marketing money, but working together, we can help Rhode Island’s remaining smokers to quit.”

 

HEALTH’s “Tobacco Made Me” campaign will reach current smokers through a series of radio, bus and print ads running through February 2013. HEALTH has also started a new Facebook page at www.facebook.com/TobaccoMadeMe, which features video interviews with Rhode Islanders describing how they overcame their nicotine addiction.

 

The new campaign is modeled after the Center for Disease Control and Prevention’s (CDC) national “Tips from Former Smokers Campaign,” which also employed the help of former smokers to illustrate the dangers of tobacco.