Unfortunately, Rhode Island lawmakers rejected Governor Lincoln Chafee’s balanced and reform-minded approach to closing the state’s budget shortfall for next fiscal year.
Senate members gave final approval to the House’s revised spending plan this week, both chambers choosing significant spending cuts over the governor’s sensible tax package. Governor Chafee proposed closing half of the budget gap with a $160 million comprehensive sales tax reform package that included adding dozens of services to the state’s sales tax base, lowering the state sales tax rate from seven to six percent, and taxing more than 40 currently exempted goods at a one percent rate. Chafee also supported mandatory combined reporting which would have helped level the corporate tax playing field for in-state businesses.
Caving to special interests who lined up in April to denounce the Governor’s plan, the final budget only adds five items to the sales tax base including non-prescription drugs and sightseeing tour packages. Combined with a few other minor tax and fee changes, the final budget raises only $30 million in new revenue and reduces spending by more than $150 million. According to the Providence Journal, more than half of the budget cuts impact programs for the poor, elderly, disabled and homeless.
Photo via J. Stephen Conn Creative Commons Attribution License 2.0