PROVIDENCE – Gov. Lincoln D. Chafee on Wednesday unveiled an $8.2 billion state budget proposal for the next fiscal year that would cut Rhode Island’s corporate tax rates to the lowest in New England.
“We have avoided tax increases and are lowering the corporate rate through both good fiscal management and a strengthening economy,” Chafee said in a state-of-the state speech introducing his blueprint for the year ahead.
The corporate tax rate would drop from the current 9 percent to 8 percent starting in January 2014, to 7.5 percent in January 2015 and then 7 percent in January 2016.
To help pay for the corporate tax cut – estimated to cost $8 million in the fiscal year starting July 1 and rising to $25.2 million fiscal 2017 – Chafee proposes scaling back Jobs Development Act tax incentives and eliminating Enterprise Zone tax credits.
The budget would also revive the state’s historic-preservation tax credit program using at least $25 million in abandoned credits.
Overall, Chafee’s budget raises state spending by $64.7 million, or 0.8 percent, from the budget approved by the General Assembly for this fiscal year.
Unlike Chafee’s two previous budget proposals, his plan for next year does not include any broad-based tax increases, such as expansions of the sales tax.
The budget is able to increase spending without the tax increases of previous years thanks to a larger-than-anticipated current-year surplus and better-than-expected tax collections. Together, those additions reduced what had been a projected deficit by $61 million.
The budget includes $8.2 million in additional spending on higher education, but would include language barring the University of Rhode Island, Rhode Island College or the Community College of Rhode Island from raising tuition or cutting financial aid.
Other initiatives in the budget include:
$30.4 million in additional local public school aid through the new funding formula.
$20 million in new aid to cities and towns, including $10 million that communities can only secure by having an approved local pension recovery plan.
$10 million to local street repair projects.
$3 million over the next two years for paid internships with Rhode Island companies and to accelerate a nontrade apprenticeship program.
Use $3 million in federal funds for a child care assistance program for 400 working families.
An increase of $600,000 in funding for state tourism marketing.
$500,000 in additional funding for the Interstate 195 Redevelopment District Commission.
The elimination of a $42 hazardous substance notification filing fee.
Under Chafee’s plan, the Jobs Development Act tax-incentive program would be cut by 25 percent in fiscal 2014 and by half in subsequent years.
Chafee proposed eliminating the incentive program in his first state budget.
The Jobs Development Act rewards companies with corporate tax breaks for hiring large numbers of workers and cost the state $16.4 million in fiscal 2012. CVS Caremark was by far the largest beneficiary with $15.4 million of those credits.
Chafee’s cuts to the Jobs Development Act are projected to save $10.3 million in fiscal 2016, the first year they would be fully realized.
Terminating the Enterprise Zone program is projected to save $630,000 in its first full year.
Estate and Corporate Income Taxes are changing next year, and business owners and executives should know the details. The PBN Summit on November 6th will provide those details and more - including how much Obamacare's Employer Mandate could cost.
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