2010-01-21 / News

Jamestown legislators weigh in on budget cuts, taxes and LNG

By Steven Stycos

Ruggiero Ruggiero As they struggle with Rhode Island’s budget deficit, Jamestown’s state legislators do not have much positive to say about independent gubernatorial candidate Lincoln Chafee’s proposal to tax food, clothing and over-the-counter drugs to close the budget deficit.

Although she calls Chafee’s stand “courageous,” State Representative Deb Ruggeiro (D-Jamestown), blasts his proposal.

“It’s so unfair,” she said. “It’s so regressive. I do not support taxing those items.”

State Senator Teresa Paiva- Weed (D-Newport) is gentler, but also critical.

“My concern is that Senator Chafee’s proposal would have the most significant impact on the middle class,” she said.

When he announced his gubernatorial campaign on Jan. 4, the former U.S. senator and Warwick mayor proposed placing a one percent tax on items now exempt from the sales tax, such as food, gas, clothing and nursing home fees, in an effort to raise $89 million a year.

Paiva-Weed Paiva-Weed The state currently projects a $219 million deficit for this year.

Governor Donald Carcieri’s budget-balancing proposal is built largely on cutting aid to local cities, towns and school districts, and Chafee says he wants to prevent further increases in property taxes.

Although they oppose Chafee’s proposal, Paiva-Weed and Ruggiero agree that Carcieri’s plan will raise property taxes.

“Pretty draconian,” Ruggeiro said.

“It appears to me it would have the inevitable effect of raising property taxes,” Paiva-Weed said.

A November 2009 House Fiscal Advisory Staff report found that when compared to other states, Rhode Island relies “much more heavily” on property taxes to fund government and “less” heavily on sales tax. The ocean state also relies on personal income tax “slightly more” than other states, according to the analysis.

In 2006, Paiva-Weed acted decisively to reduce local property taxes by sponsoring legislation to limit the budget increases that local town councils and school committees may approve. The bill, known by its number – “3050” – passed, and is gradually reducing annual town spending increases from 5.25% in 2008 to 4.75% this year to an expected 4% in 2013.

The 3050 bill has been extremely successful, according to the nine-term senator.

“It’s forced the cities and towns to achieve savings to stay under the cap,” she said.

Despite R.I.’s sinking financial condition, one tax – the flat tax – is scheduled to be reduced next year, giving the state’s wealthiest citizens a large tax cut.

Enacted by the legislature in 2006, the provision allows taxpayers to pay a flat percentage of their adjusted gross income, rather than use the regular income tax tabulation system. For 2009, the flat tax rate was 6.5% and, according to R.I. Division of Taxation estimates, it cost the state treasury $34.7 million.

This year, the rate is scheduled to drop to 6% and cost $50.5 million.

Most of the windfall is collected by taxpayers whose income is more than $200,000, according to the taxation division, and R.I.’s richest citizens collect the biggest checks.

In 2009, the estimated 298 people who earned between $200,000 and $300,000 received an average tax cut of $703, thanks to the flat tax. The estimated 283 people with an income over $5 million, however, pocketed an average of $33,172.

As Senate president, Paiva- Weed negotiates budget compromises with the governor and the House of Representatives, so she avoids rigid positions until she knows a majority of senators support her.

With the flat tax, however, she comes close.

“Certainly, whether we can afford a tax cut next year is a necessary part of the discussion,” she said, after stressing the need to protect the state’s neediest citizens by financing proper staffing at the Zambarano and Eleanor Slater hospitals.

Last year, Ruggiero was one of 22 rebel House members who opposed the Democratic leadership and supported repeal of the flat tax. But her support has waned and in a recent interview with the Jamestown Press, she stated, “I’m not sure where I stand on that now.”

Instead, she favors reducing “cumbersome” regulations, cutting permit fees and perhaps granting tax incentives to encourage small business.

“In this state, we need jobs, jobs, jobs,” she said. “We need more people paying taxes, not more taxes.”

Both Jamestown lawmakers lauded Governor Carcieri’s appointment of Newport County Chamber of Commerce Executive Director Keith Stokes to head the R.I. Economic Development Corporation. They also oppose construction of a liquefied natural gas terminal in Mt. Hope Bay, which would increase tanker traffi c around Jamestown.

Paiva-Weed said she expects to appoint a Senate task force to examine the issue and propose new laws to help block it.

Both legislators also plan to meet with the Jamestown Town Council soon to solicit views on legislation needed by the town.

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