Governor Carcieri and the Politics, Maybe, of Tax Reform
Possibilites for tax-reform in this session of the Rhode Island legislature appear strangely muddled. On the one hand, Speaker of the House William Murphy named tax-reform as one of the three highest priorities for the 2006 legislative session…
Let it be our New Year’s resolution; let it be our sense of duty to every Rhode Islander struggling to make ends meet that puts Responsible Tax Reform, A Comprehensive Energy Strategy, and A Fair Minimum Wage and to protect identities of individuals and other things that come to the floor front. Let?s resolve to make those some of our legislative priorities this year (emphasis in original).(Sidebar: Does anybody understand what the phrase “to protect identities of individuals” means in this context?)
Despite the fact that the Speaker of the House — generally regarded as the most powerful individual in Rhode Island politics — is amenable to tax-reform, Governor Donald Carcieri was recently quoted in an Andrea L. Stape article in the Projo as saying that he doesn’t believe tax-reform is possible this year…
Consequently, he is considering a legislative proposal that would phase in a reduction of the historic-preservation tax credit and follow that with a phased-in income tax cut. Overall, he said that structural change would bring the state’s tax burden more in line with neighboring New England states and make it more attractive to companies.I see two possibilities for the disconnect between Governor Carcieri and Speaker Murphy. The first is that the governor wants to proceed with extreme caution due to the budget shortfall. The most recent estimate says that Rhode Island needs to close a gap of about $77,000,000 for the current fiscal year. It could be that the Governor doesn’t want to advocate tax-cuts while the budget still needs to be reconciled and program cuts may be necessary.
The governor said the proposal is interesting now, since it would work to reduce the state’s tax burden in future years without significantly affecting the 2007 fiscal budget.
“This year is probably not the year to get tax [reform] done,” he said.
However, there may also be a political element at work here. The Governor’s political strategists could be telling him that he and Republican legislative candidates would lose an issue to run on if a major tax-reform package were to pass this session. The idea that the Governor is thinking politics also explains why he has embraced the minimum-wage increase this (election) year that he vetoed last year.
Either way, I fear the Governor is being a tad shortsighted. Governor Carcieri needs to seize this opportunity to shape the debate about Rhode Island’s economic and fiscal future. By talking about the minimum wage increase and tax-reform at the same time, explaining how employers and employees are all part of the same community, and how taxes and regulations are all part of the same system, the Governor could effectively counter the Democrat’s message of class warfare in a way that cannot be done when fiscal and economic issues are discussed in an isolated, unconnected manner.