An Open Letter to the R.I. General Assembly from RIEDC Executive Director Saul Kaplan on Proposed Tax Legislation
March 31, 2008 | Print this page | Share This | Email this page
Business and tax climate have a powerful effect on our efforts to reposition Rhode Island’s economy and create more high-wage jobs for our state’s citizens. We must continue to improve Rhode Island’s tax competitiveness and hold the line on the progress we have made. Two bills recently introduced to the Rhode Island House of Representatives (H7950 and H7343) seek to increase personal and business income taxes and raise capital gains taxes. These changes to our tax structure will increase the tax burden faced by our state’s residents and businesses and jeopardize progress we have made in improving our regional and national competitiveness.
Read the RIEDC position paper, "Stay the Course on Rhode Island Tax Reforms"
The General Assembly has made recent strides to improve our tax climate. In 2006, the GA adopted one of the most sweeping pro-growth tax reform packages seen in any state in recent years. The move did not escape the attention of the nation's top financial leaders and on July 5, 2006 The Wall Street Journal chronicled Rhode Island's tax package in its editorial pages. In one move, the WSJ editors wrote, "Rhode has gone from the state with the third highest income tax rate in the nation to the 27th." We simply cannot afford to move backwards on our competitiveness.
Rhode Island has not yet phased out the capital gains tax as intended by the law enacted in 2001 and the alternative maximum flat tax enacted in 2006 is also not yet fully implemented. Time is needed to measure the full impact of these tax changes and to affirm that Rhode Island is a state where businesses can expect transparent and stable tax policy.
Although the impact of these tax reductions cannot yet be fully measured, the economic importance of cutting the State’s capital-gains tax should not be underestimated. Capital-gains taxes are direct levies on investment, risk-taking and job creation. In this global market for capital, Rhode Island is finally in a position, by not taxing capital gains, to unleash entrepreneurial energy and become a magnet for capital.
RIEDC is working with public and private sector partners to implement our Economic Growth Plan, which lays out a clear vision and specific action steps for a stronger economy and creating new jobs. The plan’s goal is to increase the percentage of Rhode Island jobs that pay above the national average wage ($42,000) from 40 percent today, to 60 percent over the next 10 years. This transition will create 79,000 jobs, $2.5 billion in state income, and $83 million in income tax revenue in today’s dollars. Although many factors will affect our success at repositioning our economy, protecting the gains we have made in improving our tax competitiveness is central to the success of this — and any — economic growth plan.
Recent changes to create a flat tax option, lower capital gains taxes, cap property tax increases and phase out the car and inventory taxes are all good steps forward. We ask that you continue to support programs and policies that enhance, rather than diminish, Rhode Island’s competitiveness.
Saul Kaplan
Executive Director, Rhode Island Economic Development Corporation
