Speaker Fox Calls Chafee Tax Plan A No Go

Salon owners, car dealers, theater and newspaper owners and Chamber of Commerce representatives from around the state turned out in force Wednesday to protest Governor Lincoln Chafee’s proposal to expand the sales tax.

House Speaker Gordon Fox met the deluge of protest with a statement rejecting the governor’s plan.

"The House will not pass the budget in its current form. We will instead develop alternatives to this proposal and will continue to work with the Governor to amend his budget submission." Chafee’s plan was meant to address a projected $331 million deficit.

His proposal called for a reduction in the state sales tax from 7 percent to 6 percent, but would significantly widen the base of taxable items by including previously untaxed goods, services, recreation and entertainment tickets, maintenance and repair labor and professional organization dues.  The proposal also includes a new 1 percent tax applied to a laundry list of previously untaxed goods such as aircraft, boats, building materials, clothing, coins, heating fuel, horse food, sales by writers and composers, textbooks and water.

“This is a tax increase of historic proportions,” said , an East Greenwich resident and director of the Bryant Institute for Public Leadership, at the public hearing before the House Finance Committee.

Sasse said that most states that have increased sales tax on items have done so incrementally and that broad-reaching proposals like the Governor’s have been unsuccessful in gaining passage in other states.

He cited massive sales tax regulations that were implemented in Florida in 1997 but repealed seven months later.  In 2007 Michigan extended taxes to include a number of services, but repealed it the day it was supposed to go into effect.  Maryland also attempted a reform similar to this proposal, which was repealed before it was enacted, according to Sasse.

Business leaders from vastly different sectors were united in their opposition of the new tax plan. “This tax adds another burden on our business,” said John Howell Jr., the publisher of the Warwick Beacon and Cranston Herald. 

Chafee’s proposal places a 6 percent tax on subscriptions as well as individual newspaper sales. Howell said he can’t charge readers an additional 3 cents for each paper sold out of a vending machine, meaning his business would have to “eat” these tax increases.

also made presentations to the committee. Salon owner Lyn Jennings said the new 6 percent tax on hair and nail salons would reduce the number of customers and create a new layer of overhead that salon managers will have to deal with.

Tammy Stewart, a hairdresser, said that the new tax would cost her $600 per year.

Speaker after speaker at the hearing, which lasted all day, criticized the Governor’s proposal. In his statement, Fox offered to help Chafee construct a new plan to deal with the deficit.