No Consensus On Tax Hike As Lawmakers Mull Income Inequality

Jan 8, 2014

Members of a union-backed coalition call for higher taxes on the wealthy during a 2013 Statehouse rally.
Credit Ian Donnis/File Photo / RIPR

State legislators are set to focus attention on the issue of growing economic disparity by viewing the Robert Reich documentary "Inequality For All" Wednesday afternoon. Yet there's little consensus on the most controversial way to tackle the issue -- raising the state income tax for upper-income Rhode Islanders.

State Representative Larry Valencia (D-Richmond) says he remains hopeful about the outlook, even though House Speaker Gordon Fox and Senate President Teresa Paiva Weed have opposed attempts to raise the tax rate for more affluent residents. "It's pretty obvious that there's a growing disparity between the wealthiest and the least fortunate income earners in the United States and in Rhode Island," Valencia says. "Public opinion polls will tell you that 60 to 70 percent of the population is supportive of raising rates on the wealthy."

Fox and Paiva Weed have been unwilling to change course since a cut in the state's top tax rate became law in 2010.

Valencia argues that additional tax money could be used to boost Rhode Island's economy. “If our cities and towns are doing well, if we’re providing money for higher education, if we’re providing money for our roads and our bridges, those are all things that are going to make Rhode Island a more attractive place to do business,” he says.

Ironically, the legislative leaders' opposition to a tax hike puts them on the same page with one of the staunchest conservatives on Smith Hill, state Representative Doreen Costa (R-North Kingstown). She argues that increased volunteerism is the way to reduce disparities in income.

“We don’t have to tax the rich to help the people that need it," Costa says. "There are always ways around that. Go volunteer at your food pantry. Go volunteer and collect food for the people in the neighborhood or the people in the state.”

Costa says the issue of economic disparities hits home with her because she grew up "dirt poor" and continues to work two jobs to scratch out a living. She says she participated in a food drive before Thanksgiving to help the needy in her community and pursues similar efforts year-round. "The people that are successful, they're successful," Costa says. "We shouldn't be asking them to pay more taxes."

Tax hike opponents say it would hurt Rhode Island's competitiveness. Supporters, including a union coalition, say the last tax cut has failed to generate jobs or offer other improvements for the state.

A related proposal, to boost economic activity by eliminating Rhode Island's sales tax, has received attention through a series of public hearings. Yet the idea seems likely to languish without a new way to generate the almost $1 billion generated by the sales tax.

Larry Berman, spokesman for House Speaker Gordon Fox, says Fox remains open to a number of approaches for reducing income inequality, including a possible increase in the minimum wage and a possible hike in funding for RIPTA.