Small Business Owners: Chafee Tax Hurts
Saturday, March 12, 2011
Ernie the Barber might be on board with Governor Lincoln Chafee’s sales tax proposal, but some small business owners say they are only now beginning to climb out of the recession and this isn’t the time for the government to be asking for more.
During his budget address earlier in the week, the Governor laid out plans to lower the state’s sales tax from 7 percent to 6 percent, but expand the list of current goods and services that fall under the tax. The Governor also introduced a new one percent tax on currently exempt items, but chose not to include groceries and prescription drugs on the list.
The Chafee administration believes the proposal will generate an additional $165 million in sales taxes for the state.
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But Jen Ortiz, owner of Extreme Cuts in downtown Providence, said she is worried about how her customers will react to the tax and questioned whether she was going to have pay her accountant more for the extra bookwork he will have to do.
Ortiz opened her Westminster Street shop six years ago and was one of the few downtown small businesses that managed to survive the recession. When she opened the salon, her business plan called for haircuts to cost over $23 by 2011, but she is still charging $17. She said the tax will likely force her to raise prices, but it won’t be of any benefit to her business.
“At the very least, it will cut into our tips,” Ortiz said. “I’m not sure if it will stop people from coming in. I mean, will that dollar really make a difference? During the recession, guys stopped coming in. They just shaved their heads. I don’t think this will be that bad. But it will hurt.”
That’s My Livelihood
Rajah Patel, a local taxi driver, agreed with Ortiz’s assessment, saying the Governor’s proposal will cut in to his tips. Patel said he depends on a customer’s generosity the same way waiters and waitresses do and that if the sales tax hurts his tips, he will face difficult decisions.
“That’s my livelihood, man,” Patel said. “I’ve been doing this for eight years and this is as slow as it’s ever been. It’s slow and gas prices are too high. A new tax will just make it slower and it will get to a point where I might have to find another job.”
Patel said his average take home pay, including tips, is around $85. He works almost 12 hours a day, six days per week, which equals out to just over $26,000 a year. He wasn’t sure how much the tax might cut into his tips, but said he would struggle making anything less.
“I’ve got a family, two children in school,” Patel said. “What am I supposed to do?”
'I Can't Afford This'
Workers that rely on tips aren’t the only ones that could be affected by the Governor’s budget proposal, which isn’t likely to be passed until sometime in June. The long list of newly taxes businesses would range from dry cleaning services to live entertainment to pest control companies.
The owner of a Providence dry cleaning service said business is already slow and that a new tax would not help with anything.
“Of course nobody is happy about these taxes,” she said. “I hope they don’t let it happen.”
Like Ortiz, the woman also worried about the extra bookwork that will need to be done. She said she would probably need to bring someone on part time to help with paperwork and that the worker will likely cost more than the sales tax generates.
“I can’t afford this,” she said.
Making Due
Still, Ernie the Barber isn’t the only one who understands where Governor Chafee is coming from. Rafik Mnatsakanian, owner of Downtown Shoe Repair on Weybosset Street, said he isn’t happy about the new proposal, but he’s willing to deal with it.
“This is no good for customers,” he said. “It hurts them, so then it hurts me. But they don’t really have a choice if they need a shoe fixed.”
Mnatsakanian said he wasn’t interested in criticizing the Governor because he understands that difficult decisions needed to be made.
He did, however, have one gripe Chafee could certainly relate to.
“More taxes, that means more complaining,” he said.
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