RI Zero-Zero Sales Tax Debate: New Report Unveiled
Tuesday, October 01, 2013
According to the Rhode Island Center for Freedom and Prosperity, the report "documents how via a vibrant and growing state economy, not via higher tax rates in other areas, that other no-sales-tax states are able to collect the revenues they need to manage their affairs. These states also, generally, spend less per person than does the Ocean State."
The "zero-zero" proposal has been under consideration by a Special Joint Legislative Commission tasked with weighing its merits.
"We thank the commission for keeping an open mind about this game-changing policy reform idea that will create the opportunities necessary to help keep Rhode Island as home to more families and businesses", said Mike Stenhouse, CEO with the Center. "It is important for commission members to know that other states are aggressively moving towards public policies that will enhances their competitiveness, and that Rhode Island must keep pace; that we - as public officials and public opinion leaders - have the power forge our own brighter future; and that the status-quo is the enemy of that future".
Center Touts Report Highlights
- Non-sales-tax states have higher revenue per capita than Rhode Island in certain key areas, without necessarily taxing at a higher rate.
- The overall tax structures of non-sales-tax states do not rely on high rates in multiple categories.
- Despite Rhode Island’s high taxation in all available categories, revenue in non-sales-tax states proved more resilient than in RI during the economic crisis, falling less and recovering more quickly, at and above the national average.
- Non-sales-tax states manage to spend more per capita on critical government activities than RI, such as infrastructure and education.
- The exception, where non-sales-tax states reduce their spending relative to Rhode Island, is in social welfare/wealth redistribution.
- Non-sales-tax states have all seen net taxpayer migration from other states to them; Rhode Island has gone the other way.
- The employment situation is healthier in non-sales-tax states than in Rhode Island.
- Studies show residents will cross borders to shop in states without sales taxes.
- The high population density across Rhode Island’s borders is likely to amplify the benefit to the state.
Zero-Zero Effort Continues, Faces Opposition
At the time, Stenhouse said, "How can we afford not to do this? If state leaders are serious about creating renewed opportunities and a brighter economic future that will help keep our families together and at home here in Rhode Island, we call on them to act upon their recent promises to make economic development the number one priority for our state."
This past June, URI Professor of Economics Len Ladaro said he was opposed to the proposal.
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,” and was predicting a “fiscal cliff” for the state in approximately four to five years with "major gambling enterprises" coming online in MA, making elimination of the sales tax problematic for revenue.
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