As a presidential candidate running for the Democratic nomination in 2016, Lincoln Chafee has yet to lay out a vision on tax issues, so the only indications so far of what his positions may be lie within his record as a former U.S. Senator and Governor in Rhode Island. And the evidence suggests that Chafee largely supported fiscally responsible tax policies, even when such positions were unpopular among his fellow lawmakers.
While representing Rhode Island in the U.S. Senate, Chafee was one of the few Republicans to consistently vote against the fiscally irresponsible and regressive Bush tax cuts. A congressional report card by Citizens for Tax Justice (CTJ) gave Chafee a “B,” the highest grade earned by any Senate Republican and a grade higher than many Senate Democrats earned, for his four votes against the Bush tax cuts. In fact, his votes on the Bush tax cuts line up exactly with his fellow presidential aspirant Hillary Clinton. The one vote that prevented both Chafee and Clinton from earning an “A” was their vote, along with 67 other senators, for the American Jobs Creation Act, which infamously included a disastrous repatriation holiday.
Rather than run away from his opposition to the Bush tax cuts, Chafee has highlighted in recent days the fiscal irresponsibility of the cuts, noting how hard it had been to win the fiscal surpluses of the late 1990s and how the Bush tax cuts reversed the revenue increases necessary to create them.
During his first two years as Rhode Island governor (Chafee was elected as an Independent and then became a Democrat in 2012), Chafee stood out as one of the few state executives willing to call for revenue increases to counter shortfalls stemming from the recession. Specifically, Chafee fought for a sales tax reform package that would have expanded the tax to a host of exempt services and products and filled half of the state’s budget gap. Unfortunately, Rhode Island legislators substantially scaled back his package, applying the sales tax to only five additional items and raising only $30 million in new revenue through the reform.
Another notable reform Chafee enacted was the passage of a law requiring Rhode Island’s state analysts to evaluate the impact of the state’s economic development tax breaks. The issue was that Rhode Island, along with a host of other states, did not require any sort of analysis as to whether its costly economic development tax incentives actually produced results in terms of jobs and economic growth. The new law helps lawmakers decide whether they should continue the breaks or opt to spend the money on other priorities.
In the last year of his term Chafee allowed the passage of a tax reform package that had regressive elements to it, though he was not the architect of the policy. The reform increased the state’s estate tax exemption from $921,655 to $1.5 million, providing a significant tax break to a very small subset of the wealthiest estates. Worse, the reform eliminated the state’s property tax circuit breaker for the non-elderly and non-disabled, which provided critical assistance to many low-income homeowners and renters to help offset the regressive impact of property taxes. Additionally, the state’s earned income tax credit (EITC) was converted from a partially refundable credit to a fully refundable credit at 10% of the federal EITC, which boosted the value of the credit for low-income households while at the same time scaling back the credit for moderate-income families who do not benefit from the refundability. On the positive side, the tax reform package did include the enactment of combined reporting and a net increase in revenue from corporate taxes.
Chafee has largely stood up against fiscally irresponsible tax cuts, and hopefully he will bring this stance to bear in tax policy discussions during his presidential campaign.