2009-04-23 / Front Page

Senator Paiva Weed leads lawmakers in economic reforms

By Steven Stycos

Teresa Paiva Weed Teresa Paiva Weed As Rhode Island's state budget situation worsens, Jamestown state Senator Teresa Paiva Weed does not regret past tax cuts, although she says some tax increases may be necessary to balance next year's budget. The newly-elected state Senate president also says a controversial new law she sponsored to limit local property taxes is working.

Paiva Weed, now in her ninth term, opposes an across the board increase in the state sales or income taxes, but says she wants to review the automobile excise tax, the income tax's flat tax option, the capital gains tax and special tax breaks. She also supports a hike in the gasoline tax. She stresses, however, that tax changes must not discourage businesses from bringing jobs to the state. "It's important Rhode Island stay competitive on the national level," she says.

Rhode Island, Paiva Weed notes, consistently ranks among the states with the highest taxes. A 2009 study by the conservative Tax Foundation reported that Rhode Island's "business tax climate index" ranked 46th nationally, while Connecticut and Massachusetts ranked 37th and 32nd respectively. A 2005 study by the United States Census Bureau determined that Rhode Island ranked 12th in per capita state taxes. Both fourth-ranked Connecticut and seventh-ranked Massachusetts had higher taxes.

During the 1990s, the legislature cut the state income and car taxes reducing revenue that today would help reduce state budget deficits. In 1997, the legislature reduced the income tax rate by 10 percent and the next year it decreased the property tax on automobiles while reimbursing cities and towns for the lost revenue. "I have not thought it was a mistake to reduce the income tax," said Paiva Weed without hesitation, but she is less certain whether the state can continue to reimburse local government for the reduced car tax.

As Senate president, Paiva Weed is a key player in budget negotiations with Governor Donald Carcieri and leaders of the state House of Representatives. When questioned about controversial issues like tax increases, she is cautious not to state firm policy positions. For example, she says the car tax should be "reexamined," as should the capital gains tax.

Paiva Weed is clear that she opposes an across the board increase in either the sales or income taxes. One aspect of the income tax, however, the flat tax option, should be reexamined, she says. Jamestown's other state legislator, freshman state Representative Deborah Ruggiero, calls the flat tax a boom for the wealthy and voted to repeal it. Now at 6.5 percent, the flat tax option is scheduled to drop to 5.5 percent over the next two years. About half the savings will be pocketed by approximately 2,000 Rhode Island millionaires, according to a Rhode Island Di- vision of Taxation estimate. Efforts to freeze or repeal the flat tax failed by wide margins in the House during the April debate over the supplemental budget.

Paiva Weed also supports a small increase in the gas tax, if proceeds go to the Rhode Island Public Transit Authority and road construction. House leaders initially proposed a 2-cent increase, but then withdrew the plan until the fate of Massachusetts Governor Deval Patrick's proposed 19- cent gas tax hike is determined. Paiva Weed says she supports two cents and wants to wait on Massachusetts before she takes a position on more.

In 2006, the Newport lawyer made her greatest impact on the Rhode Island tax policy with passage of a bill she sponsored to limit local property tax increases. Although a few years earlier the legislature increased the sales tax on meals and hotels and forwarded the money to cities and towns, Paiva Weed recalls, "that was not translating into property tax relief for citizens."

Her legislation, commonly known by its senate bill number "3050," has forced municipal governments and school committees to be more frugal, especially in negotiations with employee unions. This year it bars towns from increasing taxes by more than 4.75 percent. "For the first time, school committees have had to assume responsibility for their budgets," said Paiva Weed. Previously, school committees and town councils acted as if they represented two different groups of people, she adds. Now they need to talk to properly manage local spending. "It's not perfect and it's taking time," she said of 3050, but overall she is satisfied with the results.

Paiva Weed has mixed feelings about the recently passed supplemental budget. She is pleased it contains a state takeover of bussing children who attend schools outside their home district, an idea she promoted at the suggestion of Jamestown School Committee Chair Cathy Kaiser. She also lauds the legislature for reversing Gov. Carcieri's recommendations to withdraw money from the state's rainy day fund and sell the Garahy Judicial Complex and then lease it back.

Paiva Weed worries, however, that the House's decision, under pressure from Ruggeiro and others, to spend $25 million for local aid may make conditions worse in the coming year. "It might have been better to wait," she said, "I'm very concerned we face [a 2010 budget year] that provides no revenue sharing at all for cities and towns."

The Senate president's job takes much more time than her previous post of Senate majority leader, Paiva Weed reports. As a result, she is leaving the Newport law firm she joined after graduating from Catholic University Law School in 1984.

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