Cautious optimism on state budget

Conway Tours General Manager David Eaton says the motor-coach business finally has gotten back on track in recent months after a grueling two-year slog through the recession. More

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Cautious optimism on state budget

TAX RELIEF? Lee Johnson, standing, Providence branch manager of staffing agency Addeco, speaks with Cynthia Price. Johnson says that Gov. Chafee's tax proposals scared some customers.
Posted 6/27/11

Conway Tours General Manager David Eaton says the motor-coach business finally has gotten back on track in recent months after a grueling two-year slog through the recession.

But when he learned a new $7.7 billion state budget proposal contained a plan to tax sightseeing package tours at 7 percent, Eaton’s frustration spilled over.

“If [the tax] is truly on tour packages, we’re out of here; we will move our business out of state,” Eaton said last week, noting the Cumberland company is located just a few miles from the Massachusetts border.

While much of the business community last week breathed a sigh of relief that the General Assembly leadership largely discarded Gov. Lincoln D. Chafee’s sales tax expansion plan, some business owners and industry leaders were scrambling to learn how the new proposal – which contained a few new and expanded taxes – would affect them.

Evan Smith, president and CEO of the Newport & Bristol County Convention & Visitor’s Bureau, traded emails with tour companies and state officials in a frustrating attempt to find out who would be subject to a sales tax on sightseeing package tours.

“The travel industry is really fragile right now,” Smith told Providence Business News last week.

Others protested a proposal to tax digital downloads such as music, e-books, videos and ringtones.

Kathleen Kittrick, Verizon’s director of state tax policy in the Northeast, called the plan “problematic,” and asked state lawmakers to hold off until federal legislation addressing download taxes is passed.

Nevertheless, as the full House prepared to vote on the Finance Committee’s version of the budget last week, most business groups were cautiously celebratory – cautious because the budget proposal still faces a Senate vote this week before it is submitted Chafee.

As it stood last week, gone from the budget package was Chafee’s proposal to lower the sales tax from 7 to 6 percent – also adding a 1 percent tier – and broadening the tax to some 80 additional products and services. Gone was the restructuring of the corporate tax and implementing combined reporting – two ideas business leaders had strongly opposed.

The new proposal also would keep the Jobs Development Act tax credit. Chafee had recommended phasing out the credit, which has been used mostly by the state’s largest corporations, such as CVS Caremark Corp.

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