Will Eliminating Sales Tax Solve All Rhode Island's Problems?
- Oct 29, 2013 | Gail Cole
If Rhode Island were to abolish the state sales tax, 25,000 private sector jobs would be created. Incomes would rise. The value of real estate would soar. So says Paul Bachman, who directs the Beacon Hill Institute at Suffolk University and presented this information to state lawmakers on behalf of the Rhode Island Center for Freedom and Prosperity.
Not everyone agrees with Bachman’s model. Paul Dion, chief of the Rhode Island Office of Revenue Analysis and a member of the force tasked with looking into abolishing the state sales tax, acknowledges that private sector jobs would increase as Bachman predicts. However, he points out that public sector jobs would decrease. Bachman admits his model shows a drop in public sector jobs—about 6,000 of them; Dion thinks that number is low (Providence Journal).
In addition, Dion argues that the state would lose significantly more annual tax revenue than the $350 million figure put forth by Mr. Bachman.
The 7% Rhode Island sales tax—one of the highest in the country—raised close to $879 million in revenue during the last fiscal year. Proponents of getting rid of such a lucrative source of revenue point to the state’s consistently low rankings in “business friendliness” and its high unemployment.
Rhode Island will soon have a statewide art exemption and a trial sales tax exemption for sales of wine and spirits. Lawmakers may take a “wait and see what happens with these” before deciding to eliminate the state sales tax entirely.
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