Chafee's new budget cuts corporate tax, avoids tax hikes

Jan 16, 2013

After trying unsuccessfully for the last two years to get the General Assembly to go along with a series of tax proposals, Governor Lincoln Chafee goes in a very different direction with his proposal for the budget year starting July 1. The budget eschews tax hikes and proposes cutting Rhode Island's corporate tax from 9 percent to 7 percent over three years.

The governor's administration says that change will move Rhode Island from having the 43rd highest corporate tax rate to the 26th highest. Chafee's budget also steers more money to education, a job-creation initiative, and cities and towns.

It leans on a larger than expected surplus and higher than expected revenues to wipe out a deficit of about $128 million.

In (prepared) remarks to the House and Senate, Chafee said the state is headed to better times.

"My hope is that you all will be skeptical and wary of deviating from the steady, methodical construction of a Rhode Island economy built for today and for the future. We tried the “get rich quick” approach by giving $75 million to a retired baseball player with zero business experience. We cannot make such panic‐driven decisions again."

Other highlights:

-- Chafee's plan includes an additional 8.2 million for higher education and will stipulate that public colleges and universities can't raise their tuition or decrease student aid. His budget increases school aid statewide by $30 million.

-- The governor increases aid for distressed communities by $5 million in each of the next two budget years, raising the annual figure to a bit more than $15 million.

-- Chafee, a big supporter of legalizing same-sex marriage, called for the General Assembly to move forward on that front.

-- The governor steers $2.5 million to create a statewide internship program. The money would pay employers for half of the cost of the internship, provided they pay interns no less than the minimum wage. The program is meant to create up to 425 paid internships in the budget year starting July 1, and up to 1050 the following budget year.

-- The budget proposal reduces, but doesn't eliminate, long-term structural deficits. For example, a projected $627 million deficit for fiscal 2018 would be trimmed to $469 million.