RIPEC’s Chicken Acquiescence
Following on this Projo summary of this disappointing report from the Rhode Island Public Expenditures Council (RIPEC) isn’t quite as pro-Chafee-tax as the headlines and the Chafeedom would have us believe, but there’s far too much hedging in it.
With the exception of the new sales taxes proposed for business back-end purchases, RIPEC never quite spells out what aspects of the tax scheme it likes and doesn’t. Instead, we get language like this:
The “Sales Tax Modernization Proposal” is projected to generate $164.9 million in additional revenue for the state in FY 2012 and would make fundamental changes to the state’s sales tax system. As proposed, the plan would increase FY 2012 tax revenue from an estimated $2,380.3 million1 to $2,545.2 million, an overall increase of 6.9 percent (see chart 5). The sales tax itself would increase by approximately 20 percent. When total revenues generated through sales taxes – including the meals and beverage tax and hotel tax, which are collected by the state and remitted to the municipality in which they are collected – are considered, projected sales tax collections would total approximately $1,015 million. This level of collections would be greater than the amount of revenue generated through the personal income tax. Such a significant change should only be undertaken after careful evaluation of the pros and cons of the proposal, particularly as they relate to the state’s tenuous economic recovery.
The conclusion toward which RIPEC mildly implies — and ought to have made explicit — is that no tax increase should be included in this “modernization” effort. If the state government really wants to boost the local economy, it should lower and broaden the sales tax rate in such a way as to effect an overall tax cut.