Malik, Bates Want to Cut Sales Tax
Barrington legislators Jan Malik and David Bates have introduced bills to eliminate or cut the sales tax.
Two of Barrington’s state legislators have introduced bills to do away with or lower Rhode Island’s sales tax.
Rep. Jan Malik of Barrington and Warren and Sen. David Bates of Barrington, Bristol and Riverside are sponsors of legislation introduced in the House and Senate that would eliminate the 7 percent sales tax.
Neither expects quick passage – the bill bills will be go down to defeat – but they introduced the legislation to get the conversation on taxes started.
Malik, who owns a liquor store in Warren not far from the Massachusetts border, believes he and other Rhode Island business owners are at a competitive disadvantage with states with lower sales taxes – such as Massachusetts, 6.25 versus 7 percent in RI.
Liquor stores in Massachusetts actually have no sales tax. Malik said his business is down 20 percent since Massachusetts cut its tax on alcohol.
And Massachusetts is actually dealing with a proposal to cut its sales tax even lower – to 4.5 percent.
The bill, 2013-H 5365, calls for the end of the sales tax by October 1 of this year. The bill provides that, as of that date, all regulations relating to the collection of sales tax and enforcement of collections will sunset and, further, that as of October 1, the local meals and beverage tax will also be eliminated.
“Our sales tax is killing small businesses, especially those in border communities,” said Malik, who is a member of the House Committee on Finance to, which the legislation has been referred. “I am one of the small business owners getting hammered because, at least in terms of sales tax, I cannot compete with my nearby Massachusetts competitors.”
Malik said his legislation is partly in response to the reports that the Bay State is considering lowering its 6.25 percent sales tax to 4.5 percent.
“How can Rhode Island continue to compete at 7 percent? How can Rhode Island restaurants compete at 8 percent? They can’t. We need to find a way to fix this, and a serious discussion of our sales tax is a discussion we need to have, now, before more small stores close their doors,” he said.
Bates said he believes cutting the sales tax should be part of a larger conversation on taxes as a whole. He introduced bills earlier in the current session to cut RI’s corporate tax and maximum personal income tax.
The sales tax is one of the state biggest revenue sources -- nearly $900 million a year. Malik recognizes the impact from that loss of revenue on RI if it isn’t replaced with something else.
Malik believes that a lower sales tax will be boost economic activity in the state, which will help to replace that revenue stream.
"I just want our state to do better and to level the playing field for those businesses out there that are really hurting because other states are stealing away their customers," said Malik.
Gary Morse
10:04 am on Tuesday, February 19, 2013
Thanks to Rep Malik and Senator Bates for opening the discussion of RI's high taxes.
A recent study by H&R Block showed Providence RI residents as being the 8th highest taxed city in the US.
http://www.pbn.com/Providence-ranked-8th-most-taxed-city-in-US,86458
Barrington residents might want to catch a view of the property tax burdens and the fact that in the top 10 list, Barrington's position as having an average property tax bill in excess of $9000 was exceeded only by Bridgeport Ct being the number 1 taxed city in the US.
I wonder where Barrington would play out if you added in the average income tax bill and the sales tax burden of our residents. Would we beat out Bridgeport Ct.? It looks like we might.
Manifold Witness
5:50 pm on Tuesday, February 19, 2013
Can Representative Malik please show us some math on this?
To start the discussion.
The theory is that sales will go up enough to create jobs to add additional state income taxes to make up the $900,000,000 a year in tax revenue that the sales tax generates to the state.
Okay.
From the employer’s standpoint- How much more in sales will be generated?
And where is the break point for hiring even one more employee?
Is it somewhere above first earning back previously lost sales?
Any Obamacare implications for any RI businesses?
From the employee’s standpoint-
The newly-hired pays taxes? It's not “under the table” or “on the side”, right? (This is a RI thing – it is said with innocence of eye and a straight face like it’s a real thing, and it’s handed down from generation to generation, and it benefits both the employer and the employee who in all other circumstances pretend that they know nothing about any such thing. And the (taxpaying) listener (puzzled) goes, “Oh…oh…right…yeah…of course….I forgot" as he slowly backs away thinking, gee, it's harder to "cheat" on sales taxes, right?).
(None of this is meant as a reflection on Hon. Rep. Malik. It's just a RI thing to consider.)
So seriously-
How much are the grossed-up sales that would be required to
generate enough jobs (and what are the grossed-up wages on those jobs?) to make up in NET other taxes (show the numbers, please) the loss of $900,000,000 in sales tax?
Sen Dave Bates
9:59 am on Friday, February 22, 2013
Good questions,MW. This idea came from the RI Center for Freedom and Prosperity. On their website is the breakdown of cost and recovery. I am not so sure that it will work in it's entirety but I did feel we need to start the discussion especially if Mass goes to 4.5%. We have made changes to the tax structure over the years but have never looked at the overall tax code as a whole. We need to look at the estate tax, income tax, sales tax, corporate tax and how they all work together to make us so uncompetitive. Not the only reasons but part of the problem.
Manifold Witness
10:30 am on Friday, February 22, 2013
Thank you for responding, Sen. Bates. We understand the need to be competitive. That part is a good idea. Complete elimination, however, seems unworkable.
Did anyone do the math on the amount of additional sales? All things considered, it has to be billions of dollars.
Which most likely is not going to happen. So then the property taxes and the income taxes will have to increase to make up the difference. We are already among the highest-taxed.
It's scary.
Thank you for working on this problem.
Sen Dave Bates
10:45 am on Friday, February 22, 2013
I would not raise either tax as an offset. I haven't looked at the website for awhile but I believe they think that additonal jobs and businesses would eventualy offset the loss. As I said I don't think a total elimination of the tax is possible but it sure has people talking including some of our collegues at the legislature