RI Sales Tax Repeal Benefits Exaggerated—URI Economist
Thursday, June 13, 2013
URI economics expert, Leonard Lardaro said he is “totally opposed” to the bill to repeal sales taxes in Rhode Island. Lardaro went on to say that the group that has created and pushed the bill has used “off the mark numbers” in the name of special interests.
Why Eliminate Sales Tax?
The bill’s sponsor in the House, Representative Jan Malik (D-Warren, Barrington), told GoLocal he and a commission are studying the numbers compiled by the RI Center for Freedom and Prosperity. “I am committed to elimination of the sales tax in Rhode Island. It puts us in a bracket by ourselves and makes us a destination spot. Rhode Island is right on I-95 between Boston and New York. We want to be bringing people in to the state to spend money.”
House bill 5365 simply states it would repeal the Rhode Island sales tax. Review of the 16-page legislation strikes about eight and a half pages of the text having to do with sales tax. On Tuesday, June 11, 2013, a Sub A motion was made before the House Finance Committee to develop and implement a study commission on the bill. The bill passed unanimously, 14-0. The commission will convene over the summer and into the fall of next year to determine the viability of the plan.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTThe Rhode Island Center for Freedom and Prosperity created a “Zero.Zero” report citing an economic report card that gave Rhode Island poor and failing grades across the board. According to the Center’s data, a report card, which measures the Ocean State’s regional and national rankings in 49 sub-categories, shows how non-competitive the state has become as compared with its New England neighbors and among all states.
The Center’s CEO, Mike Stenhouse, told GoLocal that Malik’s bill is “the only game changing idea in the market.” Stenhouse said their report was developed by a modeling tool called STAMP (State Tax Analysis and Modeling Program). STAMP projects possible revenue and ramifications of a measure such as repealing sales tax in Rhode Island. “We need a game changer,” said Stenhouse. “We don’t believe Rhode Island should be restricted by a budget.”
Leading the Pack or Falling Behind?
Lardaro said, “The repeal of the sales tax is worthy of consideration, but the group that has pushed it has greatly overestimated its benefits.” Lardaro said that a repeal "would not be beneficial as compared to the cost in revenue.” Lardaro predicts a “fiscal cliff” for the state of Rhode Island in approximately four to five years. He says that with the major gambling enterprises already online in MA, eliminating sales tax is will be problematic for revenue.
Representative Malik stands behind his initiative saying that the Rhode Island Senate and the Governor’s Office may not stand behind the bill but should support the initiative of changing the way Rhode Island does business. “Rhode Island needs to be a leader instead of just being reactive,” he said. Malik believes his proposal to eliminate sales tax throughout the state could do just that and jumpstart the economy. Previous conversations regarding Malik’s crusade to eliminate sales tax in Rhode Island have revealed his personal relationship with the idea. Malik owns a liquor store in Warren, RI that borders the Massachusetts state line. He loses local retail business to consumers who can just as easily purchase alcohol at a reduced price due to Massachusetts 2010 repeal of sales tax on alcohol. This takes business from Malik and he sees inspiration in Massachusetts’s windfall and wants to take it further in Rhode Island.
Lardaro, however, disagrees. “It is a good idea but, like many Rhode Island proposed solutions, there has been little to no due diligence," he said. "The group pushing it has created a report card using an ideologically tainted model from the Hoover Institute predicting Rhode Island’s economic activity is about to explode. This calls the entire group [promoting the measure]’s credibility into question. Reform sales tax? Yes. Abandon it? No.”
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