Business leaders speak against ‘Fairness Act’

PROVIDENCE – Rhode Island business leaders turned out in force for yesterday’s State House hearing on a bill that would hike the state’s personal income tax and expand the sales tax to more goods and services.

Proponents argued that the bill – entitled “The Economic Growth and Fairness Act of 2008” – would generate more than $340 million in new revenue, while opponents charged it would create an anti-business climate and increase the burden on taxpayers.

Both sides crowded the hearing late yesterday before the House Finance Committee, filling every seat in the Trainor Hearing Room. Most of those on hand had to be satisfied watching the proceedings via a video monitor in the hallway.

Laurie White, president of the Greater Providence Chamber of Commerce, which led the Rhode Island Chamber of Commerce Coalition in opposing the measure (READ MORE), predicted Rhode Island will “plunge into an economic death spiral” if the bill passes. “Rhode Islanders cannot afford $340 million in new taxes,” she said. “This is truly a bill in the classic definition of the word.”

But not all business people present opposed the measure. South Kingstown Realtor Jonathan Daly LaBelle argued that more money is needed for local schools, and warned further cuts in education spending will keep Rhode Island growth stagnant. “We have to make sure that towns can meet the bar, the expectations, that the state and federal governments are setting,” he said.

If passed, the bill (H-7950 and S-2668) would raise income taxes by 2.5 percent; eliminate the alternative flat tax; and introduce a 5-percent capital gains tax. The state sales tax would be cut over time from 7 percent to 5.5 percent, but would be expanded to include goods such as luxury clothes and services such as tax preparation. The bill also would give a one-time rebate of $600 for every homeowner and renter in the state.

Most of the business leaders present urged the committee to look for ways to trim state spending, rather than boost revenues.

“This bill wipes out all the gains we’ve made and would set us back years,” said Charles Francis, who heads the Rhode Island office of commercial real estate company CB Richard Ellis. “Fix the real problem – government that we cannot afford.”

John Hazen White Jr., CEO of TACO Inc., threatened to leave the state if the bill passes. He could easily move 450 TACO jobs from Cranston to another company facility, in Fall River, White said. “Pushed to a certain point where it’s no longer worthwhile for me to be here, I’m gone.”

Mary Bernard, president of the Rhode Island Society of CPAs, spoke out against expanding the sales tax. “Most of the services that would become subject to the sales tax are mom-and-pop businesses, not big companies,” she said. “It’s easy to relocate, so think twice before you push businesses over the border.”

Proponents of the measure – many of them, advocates for social service programs – countered that the state’s current tax structure puts a greater burden on the middle class than on the wealthy.

“We’ve heard some spinning in this room regarding the income tax rate,” said the Rev. Duane Clinker. “What we’re asking for is some fairness .... If you make $18,000 a year in Rhode Island, your total tax burden is 13 percent of your income. If you’re at the top in income, your total tax burden is 6 percent.”

Rep. Arthur Handy (D-Cranston), one of the bill’s sponsors, said that past cuts in state taxes have simply shifted the revenue burden to municipalities. “We have been raising taxes – property taxes,” Handy said. “When you hear talk of people moving out of our state, it’s the property taxes.”

Before the close of the hearing, several members of the Finance Committee indicated they are leaning against the bill. “I don’t see that going this route would be better for the state of Rhode Island,” said Rep. Steven Costantino, the Providence Democrat who chairs the panel.

Additional information on the R.I. General Assembly, including the House and Senate daily calendars and listings of measures introduced each day, is available at rilin.state.ri.us.