Startups may profit from surplus

Awash in “found” money following the recent biannual Revenue Estimating Conference, state leaders are lining up with a host of new budget priorities, including exemptions to the minimum corporate tax.

State bookkeepers last month projected a fiscal 2015 revenue surplus of about $107 million and a fiscal 2016 revenue surplus of about $37 million.

Added to an estimated $30 million reduction in projected fiscal 2016 expenditures, the total surplus above November projections is estimated at about $173 million.

Senate President M. Teresa Paiva Weed, D-Newport, was among the first to offer ways to spend the extra cash. Topping her list, exempting new companies from paying the $500 minimum corporate tax – a yearly flat tax on Rhode Island business – for the first three years.

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She would also exempt from the tax companies with “limited earnings,” though she doesn’t have a specific limit yet or an estimate for how much the exemptions would cost the state.

“This is an issue that I … for a long time have believed is important,” Paiva Weed said.

Laurie White, president of the Greater Providence Chamber of Commerce, says addressing this tax is one of the Chamber’s top priorities.

“Startups frequently have no income or revenue, never mind a profit,” White said. “Folks start a business and the first message they get from the state is a tax bill for $500. It is a small, but important … reform.”

The annual tax generated an average of $27.6 million in revenue per year from 2011-2013, according to the R.I. Department of Revenue.

Paiva Weed has proposed four other initiatives, including local property tax relief, Medicaid transition funding, an investment in education and more money for transportation.

Gov. Gina M. Raimondo, a Democrat, issued her own press release outlining what she would have done differently had she been privy to the extra revenue in March, when she proposed a budget that estimated a fiscal 2016 deficit of $190 million. State lawmakers will decide how much of the surplus to apply to Raimondo’s budget priorities, including her push to restructure the state’s Medicaid system. Earlier this month she submitted a bill that seeks $91 million in Medicaid cuts and savings.

Sure to be dropped from her budget is a proposed tax on second homes valued at $1 million or more, popularly referred to as the “Taylor Swift tax.” House Speaker Nicholas A. Mattiello, a Democrat from Cranston, is among those who’ve opposed the tax. Raimondo agrees the surplus now makes it unnecessary.

Mark S. Deion chaired the Economic Development Committee at the annual U.S. Small Business Administration Economic Summit in January. Altering, or eliminating, the $500 minimum corporate tax was one of the recommendations he and others made there.

“You could get rid of a fee and save 50 bucks, but this is $500. It will encourage new corporations to incorporate in Rhode Island,” the small-business consultant said of Paiva Weed’s proposal. •

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