As the 2009 Session of the General Assembly comes to a close, lawmakers will be looking to close a 590 million dollar deficit in a 7 billion dollar budget, roughly 19% of the state’s total operating costs. As the debate rages between lawmakers on solutions to solve the fiscal crisis, OSPRI wants to remind lawmakers that raising taxes is not the solution.
Democratic leadership in the General Assembly has suggested a series of solutions to the crisis, all of them include tax hikes, mainly on the top tax brackets within the state. Among the scores of proposals offered, two of the most popular are hikes on capital gains and a repeal of the the alternative flat tax. Democrats are also protesting proposed cuts of the corporate income tax cut.
A program hailed by many major business publications, including the Wall Street Journal, is now on the chopping block. The alternative flat tax is one of the few bright spots in an otherwise abysmal taxation system. By allowing higher earners to opt to a lower tax level, the government is positioning itself to gain greater revenue and keep more money in Rhode Island.
Raising taxes is also not the solution for a state already known as having a tax system that is unfriendly to commerce and stifling to entrepreneurship. According to the Tax Foundation’s annual Business Tax Climate Index, Rhode Island ranks 46th in the nation for States with taxation systems favorable to business. According to the Small Business & Entrepreneurship council, Rhode Island ranks 44th in the nation for a small-business friendly tax climate.
Alternatively, Governor Carcieri has proposed cutting several smaller, less successful welfare programs such as ending a prescription drug program as well as a low-income dental program while leaving all major social services intact. He has also proposed a corporate tax cut all in a bid to generate more revenue and grant Rhode Island a more competetive business climate.
The Democratic leadership is showing little support though, and looks to continue its tax and spend programs. This leaves Rhode Island taxpayers with the question of whether to institute real reform within the system, or continue along the unsustainable path the State is currently on, pushing Rhode Island further into debt.