December 27, 2012

GOP and Sales Taxes

Patrick Laverty

It seems the RI Republicans in the State House might be finally stumbling on to an idea they can hang their hats on. Eliminating the state sales tax. Granted, it's one that they may be simply saying "me too" on as the RI Center for Freedom and Prosperity suggested this back in June. However, that's the whole point. The reason for places like this Center is so they come out with reasoned and researched ideas and then the legislature can decide which ones make sense and move them forward.

This type of idea is exactly the kind of bold thinking that the GOP needs to jump on. This is the party that can't even come up with a unified platform, but if they could forget about all the silly internal bickering they seem to get involved with and rally around an idea like this and sell it to the people of the state, from the leadership to every town committee, it's something that they could possibly see advanced.

Some are having difficulty understanding how eliminating the sales tax can help the state after about $880M of revenue is brought in through this tax. Even if businesses were to boom with the elimination of the tax, a trillion dollars multiplied by zero percent is still zero. But, if you need any evidence in seeing what a lower sales tax can do, look no further than Attleboro and Seekonk. It's no coincidence that so many stores are sitting right on Rhode Island's borders. If Rhode Island were to go to zero sales tax, we'd gradually see these stores move across the border and into the state.

But how would the state cope with the loss of the $880M in lost sales tax revenue? Well, for one, it's not that much, it's only about half of that when you don't count the gas tax, tobacco tax and meals tax that would remain in effect, according to the actual report on the Center's site. They also claim somewhere between 50 and 70% of the lost revenue would be reclaimed on the increased business presence in the state and the additional income tax revenues. If you have more business, you have more jobs and with more jobs, you have more income tax. The Center advocates for the remaining 30-50% to be made up through cuts to the state's services and even eliminating about $7M just by downsizing the state's tax collectors and tax enforcement agents.

I believe that many perceived and real problems go away when people have a job and have income. If we have businesses in the state, people will have jobs, people will have money, people will buy homes in the state, property values will finally increase and municipalities will be able to turn around many of their financial woes.

Finally, here is an idea that the state Republican party can actually get behind, do the work and get all the numbers. Make an intelligent and reasoned case to the people of the state, put on an election-like campaign blitz and then let others explain why we should all pay 7% on top of the cost of goods. Even better, this would get people to stop shopping in Massachusetts and keep the money in Rhode Island, for Rhode Island.

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Elimination of the Sales Tax would be a boon for all of RI. Of course the unions and affected state workers will all cry FOUL to Speaker Fox and Paiva-Weed. Overall it is possible, one only has to look north to Hew Hampshire.

New Hampshire is one of the few states with no statewide sales tax. There are several specific taxes levied on particular services or products. These excises include a 9% tax on restaurants and prepared food consumed on-premesis, a 9% tax on room and car rentals, and a 7% tax on telecommunications services.

Posted by: Mark at December 27, 2012 10:59 PM

After 16 straight years of Republican governors we get this pathetic swill from the rump half dozen?
I'll be impressed when they tell us the $400+ million in CUTS they want to make to allow it.

Posted by: Tommy Cranston at December 28, 2012 11:33 AM

Other than the Clintonian "cuts to the state's services".

Posted by: Tommy Cranston at December 28, 2012 11:34 AM


As for New Hampshire State Sales Tax besides the 9% tax you reported there is also 55 cents per megawatt hour on electricity and as you reported the 7% on telecommunication services there is also additional taxes on real estate transfers and alcohol.

New Hampshire State income tax is limited to a 5% tax on dividends and interest income of more than $2,400 ($4,800 for joint filers).

A family member of mine moved from Massachusetts to New Hampshire for retirement and has indicated to me his property tax is staggeringly higher than what he was paying in MA.

Get rid of the sales tax and income tax and you have to make up the money from other sources.

Posted by: KenW at December 28, 2012 5:40 PM

Autistic Commenter Ken - State revenue generation is not a zero sum equation. Some sources are more efficient than others, and the sources can have an impact on the budgeting process. New Hampshire realized some time ago that it is much easier to compete for business through sales tax and income tax than on property tax. Their government is also smaller and requires less total revenue. Rhode Island should look to them as a model. Please don't respond with a bunch of boring statistics about Hawaii - I don't care.

Posted by: Dan at December 28, 2012 7:09 PM


You got Hawaii on the brain????? DAN you seen to becoming Autistic on us!!! LOL

If so do I have some excellent news about $14B dollars and 4.8% unemployment rate!!!

If you go back and review my post above you will see I only mentioned New Hampshire and Massachusetts not Hawaii.

However if you want me to talk about Hawaii I’ll gladly do it since YOU brought up the subject!!!!

Posted by: KenW at December 29, 2012 1:46 AM

Get rid of the sales tax,it would be a Godsend. Think of how great it would be for us and the people of Ma. nearby and Ct. It would be a real public service.

Business would boom. It would be fantastic!

We should also look into how much compensation the members of the New Hampshire State legislature recieve. I've read that they only get around $500 per year plus travel expenses to and from the state house.

How much do our members get?

Posted by: helen at December 30, 2012 10:14 PM

About $12k a year plus health insurance. I think it should be 100% unpaid. Make them truly public servants.

Posted by: Patrick at December 30, 2012 10:23 PM

Wow,Patrick,I didn't know it was that much!

You might be onto something very good when you say they should be 100% unpaid. I've had thoughts like that before that I've kept to myself.

Do you think it's too idealistic an idea to ever become real?

Posted by: helen at December 30, 2012 10:47 PM

There's no need to -eliminate- it. Just simplify it so that any good that crosses a counter (or a dining room table, or a gas nozzle, or a liquor store counter) is taxed at a flat rate lower than our neighbors. This is easily achievable with a rate at something like 4%.

If we did that, then we'd attract a fair amount of retail and storefront activity, which would help bolster local tax revenues. It would also make compliance much simpler, since there would be no 'grey zone' of things that should or shouldn't be exempted, there would be no need to tax some 'services', and all the cash registers would just add 4% to everything.

Interestingly, most national Republicans seem to favor a BIGGER sales tax in order to reduce the income tax, the 'fair tax' plan does this.

There needs to be some coherence to the RI Republican plan here... You can't just be against EVERY tax that you see.

Posted by: mangeek at January 2, 2013 9:55 AM
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