Chafee firm as business groups protest tax plan


Rhode Island Gov. Lincoln Chafee defiantly defended his call to impose new sales taxes on goods and services Tuesday after business leaders rallied at the State House in protest.

Business owners and advocates said the plan to tax landscaping, dry cleaning, manufacturing equipment and many other goods and services would raise unemployment and stifle the economic recovery just as it takes hold.

Chafee said it’s up to his critics to suggest a better option.

“Crisis calls for leadership,” Chafee, an independent, said at an impromptu press conference called after the rally. “If you don’t like my proposal, what’s the alternative? No politician likes to raise taxes. … We’re waiting for a better idea.”

Meanwhile, the House GOP leader sharply criticized the new governor’s proposal and called on the General Assembly to start over with a new budget plan. “This budget is simply not acceptable,” wrote House Minority Leader Robert Watson, R-East Greenwich, in a letter to Chafee.

The back-and-forth came a day before the House Finance Committee begins hearings on the sales tax proposal, the lynchpin of Chafee’s strategy for eliminating a projected $331 million deficit without deep cuts to schools, highways or other government services.

Finance Committee chairman Helio Melo, D-East Providence, said the state’s fiscal crisis leaves lawmakers with few good options.

“I’m hearing from a lot of Rhode Islanders concerned about all the new services that would be taxed,” Melo told The Associated Press. “The governor’s budget raises $165 million in new revenue. If we choose not to go with the governor’s proposal, then we need to find that much in cuts.”

Chafee’s recommendation would reduce the sales tax from 7 to 6 percent and impose it on many items and business services now exempt, including data processing, landscaping, taxi fares, garbage collection, auto repairs and tickets to theaters and sporting events. He would impose a new 1 percent tax on agricultural products, boats, clothing, manufacturing machinery and several other goods and services now exempt.

Chafee noted that he took office in January at the start of what may be the worst year of the downturn for governments. Federal stimulus money is gone, pension costs are up and state and local governments are reeling from years of spending cuts. He said his proposal aims to restore lost education funding, address rising pension obligations and end a habit of borrowing money to pay for road projects.

“This budget will grow our economy,” he said. “Businesses will look at Rhode Island and they’ll say ‘they’re facing up to their problems. That’s a place I want to do business in.'”

But business executives at Tuesday’s rally said the tax plan would increase the cost of doing business while also reducing the money consumers and business clients have to spend. They called on lawmakers to look at spending cuts to pensions and payroll before considering any new taxes.

“Life is going to cost more,” said Laurie White, president of the Greater Providence Chamber of Commerce, the organizer behind Tuesday’s rally. “We are urging the General Assembly to say no to this very dangerous proposal.”

Rich Hittinger, president of Alliance Environmental Group, a consulting firm with offices in Warwick and Cambridge, Mass., said he may have to consider consolidating his business in Massachusetts if the tax plan goes through.

“This one may be the straw that breaks my camel’s back,” he said.

Hearings on Chafee’s sales tax proposal begin at 11 a.m. Wednesday at the State House

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