Lincoln Chafee - Independent Candidate for Rhode Island Governor

Budget Deficit

ladies.jpgChafee seeks to create new revenue through increased sales from economic growth, and not raise taxes and fees. He also recognizes that we have to honestly confront the immediate gap between the revenue we take in as a state government, and what we need to spend to support the services we provide, particularly our schools and state colleges. Chafee will oppose any changes to our taxes without first reforming our spending, particularly the mandates. But the path we are on today has led us to our current budget crisis and we need new leadership and new ideas. 

One idea that may help move Rhode Island forward is examining a one percent sales tax on items currently exempt from the existing seven percent sales tax. Chafee believes that property taxes are the hardest tax to pay, so he's opposed to passing the state's problems down to the municipalities. You pay income tax based on the rise and fall of your personal income.  If you lose your job or experience other misfortunes, property taxes are still due and your home is put at risk.  For renters – both commercial and residential – property tax affects your monthly payment as well. On the other hand, you have choices on what you buy and therefore how much you pay in sales tax.  There are a number of items that are currently exempt from the sales tax and the total dollar amount of these exempt items is $9 billion a year.  These exemptions include everyday items such as food, clothing, over the counter drugs, even newspapers and magazines. We have to make choices if we are going to be the master of our economic destiny in this state.  Rather than forcing our property taxes to rise across Rhode Island, we should carefully examine a two-tier sales tax. Other states have this system and it is working. Illinois has a 6.25% sales tax but a separate 1% tax on food and over the counter drugs. Tennessee has a 7% sales tax but a 5.5% tax on groceries. Working together, we can find the right formula for Rhode Island, one that provides the revenue we need to spare property taxpayers an ever-increasing burden, while taking into account the strain that families already feel from taxes.

Chafee wants to again point out that he will oppose any increases to our taxes without first reforming our spending, particularly the costly, and unfunded mandates on cities and towns. After we work to address the mandates, and cut government spending, then he suggests we review the idea of a two-tier sales tax if needed to close the budget gap. He suggested a 1% tax on currently exempt items. Therefore if a person spends $50 on food or clothing the tax would be fifty cents.  If a person spends $100 the tax would be one dollar. Something needs to be done to address the budget gap and this is just one idea he feels we should carefully examine. Currently all exempt items total $8,936,785,714 in untaxed revenue. If we were to tax these items at 1% the state would receive an additional $89,376,857.  This money plus reforming the mandates on cities and towns and continuing to cut government spending could help us be the master of our economic destiny in this state.  See below for a full list of exempt items.

Chafee would also consider repealing the flat tax, or at the very least, delaying the next scheduled rate reduction to help close the state's relentless budget gap. When the economy improves, Chafee backs lowering taxes on personal income and corporate profits.


 






Name of Item Total Revenue Lost by Not Taxing Tax Revenue @ 1% Reliability (1 = Most Reliable, 5 = No Data available)
Returned Property within 120 Days $0 $0 5
Installation labor $0 $0 5
Federal Taxes $0 $0 5
Transfers to Family Members $0 $0 5
Transfers - business dissolution / liquidation $0 $0 5
Sales of residential trailers $0 $0 5
Casual Sales $0 $0 5
120 days total loss or destruction $539,000 $77,000 2
Newspapers $5,500,000 $785,714 2
School meals $76,000 $10,857 2
Containers $19,200,000 $2,742,857 4
Charitable, educational, or religious organizations $0 $0 5
Gasoline $79,900,000 $11,414,286 1
Purchases for manufacturing purposes $0 $0 5
State or politial subdivisions $0 $0 5
Food products and food ingredients $125,200,000 $17,885,714 4
Medicines, drugs, and durable medical equipment $23,300,000 $3,328,571 4
Prothetic devices and mobility enhancing equipment $0 $0 5
Motor vehicles to nonresidents $6,600,000 $942,857 2
Coffins, caskets, and burial garments $2,100,000 $300,000 3
Sales by the visually impaired $127,000 $18,143 3
Air / water pollution control facilities $856,000 $122,286 4
Camps $0 $0 5
Nursing homes / hospitals rental charges $137,000,000 $19,571,429 4
Educational institutions rental charges $21,000,000 $3,000,000 2
Motor vehicles and adaptive equipment for persons with disabilities $107,000 $15,286 2
Heating fuel for residences $39,000,000 $5,571,429 2
Electricity and gas for domestic use $42,400,000 $6,057,143 4
Manufacturer's machinery and equipment $8,900,000 $1,271,429 4
Motor vehicle trade-in $15,800,000 $2,257,143 3
Precious metal bullion $0 $0 5
Clothing and footwear $86,000,000 $12,285,714 4
Water for residential use $6,400,000 $914,286 4
$20 sales of certain nonprofits (for youth activities) $0 $0 5
Farm equipment $446,000 $63,714 4
Compressed Air $0 $0 5
Flags $0 $0 5
Amputee verterans' motor vehicle / equipment $16,000 $2,286 2
Textbooks $1,900,000 $271,429 2
Supplies for hazardous waste treatment $0 $0 5
Literature for boat manufacturers $21,000 $3,000 4
Equipment for research and development $0 $0 5
Coins $0 $0 5
Farm structure construction materials $0 $0 5
Telecommunications carrier access service $0 $0 5
Tangible personalty for jewelry display $0 $0 5
Boats $0 $0 5
Investment companies' toll free calls $0 $0 5
Mobile and manufactured homes $224,000 $32,000 2
Taxes Paid Elsewhere $0 $0 5
Vehicles of nonresident armed forces personnel $0 $0 5
Sales to federal government $0 $0 5
Sales to common carriers $0 $0 5
Sales by artists $0 $0 5
Property purchased from federal government $0 $0 5
Property bought elsewhere by nonresident $0 $0 5
Property otherwise exempted $0 $0 5
Trucks, buses in interstate commerce $1,900,000 $271,429 3
Certain energy products $0 $0 1
Building materials to rebuild after disaster $0 $0 5
Florist supplies $0 $0 5
Horse food $0 $0 5
Non-motorized recreational vehicles sold to nonresidents $0 $0 5
Spinkler and fire alarm systems $0 $0 5
Aircraft and aircraft parts $1,043,000 $149,000 4
Renewable energy products $20,000 $2,857 3
Dietary supplements $0 $0 5
Exemption for sales by writers, composers, and artists $0 $0 5
Exemption for municiple economic development (MED) zones $0 $0 5
Agricultural products which constitute fibers for human use $0 $0 5
Exemption for human blood $0 $0 5
Prewritten computer software delivered electronically $0 $0 5
Total of all Sales and Use Tax Exemptions $625,575,000 $89,367,857 4.166666667
       
Source: Department of Revenue, Division of Taxation -- Tax Expenditures Report FY2008    

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