By Susan A. Baird
PBN Web Editor
PROVIDENCE – “Even in times of fiscal constraints, it is crucial to be thoughtful and understand the implications of tax policy changes before they are enacted,” the Rhode Island Public Expenditure Council said today in a statement accompanying its latest update on the state and local tax system.
“RIPEC urges caution when considering the many tax policy proposals before the General Assembly in the current fiscal environment,” the policy group said. “Effective tax policy legislation should have an economic impact analysis that clearly outlines the estimated impact on resident tax burdens, and the long- and short-term effects on economic development and competitiveness.
“Changes to the tax system designed to increase revenue must be carefully weighed against their potential to impact sales, investments and individual and business decisions,” RIPEC said. “Various bills introduced in the House and Senate have the potential to impact the State’s tax structure.”
One such measure – “The Economic Growth and Fairness Act of 2008,” (H-7950 and S-2668), which RIPEC described as “an omnibus bill which will have a significant impact on the personal income, sales, business and property taxes currently in law” – is slated for a public hearing this afternoon at 4:30 p.m. before the House Finance Committee. (READ MORE)
But, RIPEC said, “a thoughtful tax restructuring effort – distinct from a piecemeal approach – will enable the establishment of a tax system that reflects the Rhode Island of tomorrow instead of the Rhode Island of yesterday.”
For every $1,000 earned by residents, state and local governments in Rhode Island collect $122.68 in taxes, or 12.3 percent of personal income, RIPEC said in its 30-page report. That tax burden is 8.7 percent above the national average and ranks Rhode Island 7th highest among the 50 states – ahead of both Connecticut (11th highest, with collections amounting to 11.9 percent of personal income) and Massachusetts (34th highest, with collections of 10.7 percent).
Personal income taxes are the largest source of revenue for all three states, the group found. But Rhode Island relies less on the personal income tax than its neighbors, placing a greater reliance on general sales taxes and use taxes to fund public services.
“Before any changes to the state’s tax policy are made, the impact must be carefully considered, using the most recent data available, to ensure that the resulting state-local tax structure is equitable, fair, balanced and serves to strengthen the state’s economy – in both the short term as well as the long term,” RIPEC said.
In upcoming weeks, the group said, it “will be releasing a comprehensive report … that will provide further analysis to help the discussion and highlight issues for consideration before any changes are made.”
The Rhode Island Public Expenditure Council is an business-backed nonprofit and nonpartisan public policy research and education organization. For more information, including the full “RIPEC Report on Rhode Island’s State and Local Tax System,” visit www.ripec.com.
