The General Assembly continued its efforts to improve the state’s tax climate in the recently ended 2014 session.
The changes to Rhode Island’s tax code were significant, and taken as a whole are roughly revenue neutral (given the state’s continuing long-term budget challenges, that is a good thing), yet they should make the state a more attractive place for many businesses.
The marquee items are the reduction of the corporate income tax rate to 7 percent from 9 percent and the increase of the estate tax threshold to $1.5 million from $921,655 (with an accompanying elimination of the “cliff”). And while the legislature can take a bow for the work it has done, there is more work to do.
One of the other changes is the institution of combined reporting, a rule that mostly affects large corporations that do business here and thus is not likely to harm those small businesses that call Rhode Island home (or would like to). And it does not make Rhode Island an outlier on tax policy, since four of the other five New England states demand combined reporting, as do 19 other states across the union.
One temporary change – the extension of the sales tax exemption on wine and spirit purchases – needs to be examined before any permanent action is taken. With the accompanying increase in the excise tax paid by distributors and manufacturers, there is likely to be some effect on liquor sales in the state. That change, whatever it is, should be documented to inform future discussions.
All in all, it was a good season for tax reform. Now it’s time to look ahead to next year’s session. •