The speaker of the Rhode Island House says Gov. Lincoln Chafee’s call to expand the sales tax is “unacceptable” and won’t be considered by the House unless big changes are made.
Speaker Gordon Fox’s announcement came after scores of business owners urged lawmakers to defeat the proposal during a standing-room-only hearing Wednesday. They told the House Finance Committee that the tax changes would cost jobs and cripple an already fragile economy.
Fox’s opposition almost certainly spells the end of Chafee’s proposal as it now stands, and it deals an early political defeat to the new governor.
Lawmakers now must start over with new ideas for eliminating a projected $331 million deficit in the approximately $7.6 billion budget. Fox, D-Providence, said in a statement issued Wednesday evening that House lawmakers will work with Chafee to craft a new proposal.
Chafee, an independent, had proposed lowering the sales tax from 7 percent to 6 percent and imposing it on currently untaxed items including taxi fares, movie tickets, data processing and auto repairs. He also would impose a new 1 percent tax on items including farm products, boats, clothing, home heating oil and manufacturing machinery.
The tax plan would have generated an estimated $165 million in its first year. It was the cornerstone of Chafee’s plan to balance the state’s budget.
Chafee told The Associated Press on Wednesday he’s willing to work with lawmakers on alternative proposals. He said he was frustrated by the negative reaction to his proposal. A broader sales tax, he said, would do far less damage to the economy than deep cuts to schools, roads and other state services.
“Come on, we’re in it together,” Chafee said. “I don’t like taxes, but I’m a realist. I want to leave the state better than I found it.”
Nearly 200 people went to the Statehouse to speak out against the tax plan during a legislative hearing Wednesday. Real estate agents, fishermen, optometrists and theater managers all delivered the same message to the General Assembly: Cut spending before you consider imposing new taxes.
“We are mad as hell,” said Lyn Jennings, one of several hair stylists who took the day off to lodge their protest. “This kind of spending has to stop.”
Concerns about the impact of the tax changes on businesses and families hit home, according to members of the House Finance Committee.
“It’s too much of a burden,” said Rep. Frank Ferri, D-Warwick. “I never thought it (the proposal) would survive in its current form.”
Fox cited Chafee’s call to impose a tax on home heating oil, residential water bills and manufacturing equipment as “particularly offensive.” He said he spoke to a majority of House members before announcing his opposition.
“I have been extremely troubled by this sales tax plan since its submission,” Fox said. “… There has also been overwhelming opposition expressed to me by House members, the business community and by thousands of average citizens.”
Lawmakers have proposed several alternatives for raising new revenue or cutting spending, including a tax on the state’s highest earners, cuts to social services, a narrower expansion of the sales tax or across-the-board cuts to all state agencies.
Chafee said he’s open to different ideas — but not if it means cutting funding for schools, ignoring mounting pension costs or borrowing more money for road projects.
Only two people spoke in support of the tax proposal at Wednesday’s hearing. One of them was Kate Brewster, executive director of the Poverty Institute, which says it works to develop and promote policies to improve the economic security of low- and modest-income residents.
She said Rhode Island has already cut funding for cities and towns, schools, roads and programs for vulnerable residents.
She acknowledged that hers was the minority view Wednesday.
“I want to ask if body armor is going to be taxed,” she joked. “Because I may need some.”