Scott MacKay weighs in on the new tax law

Providence, R.I. – Last week, Rhode Island Governor Don Carcieri signed into law an overhaul of the state's income tax system. At the signing ceremony, the Republican Governor was joined and cheered by Democratic General Assembly leaders. But WRNI political analyst Scott MacKay says many Rhode Islanders might not be cheering about the new law when they pay their taxes next year.

The state's political elite huddled under Gilbert Stuart's majestic painting of George Washington at the State House last week to celebrate the new tax system. Its sponsors say it will make Rhode Island more economically competitive with Connecticut and Massachusetts .

The core of the measure, approved unanimously by the legislature, addressed a complaint long heard in the business community: That Rhode Island's state income tax, for top earners, is too high and so substantially higher than in Massachusetts that it's causing the wealthy to leave the state and keeping business from moving in.

Whether this is fact or not was never really considered. It was a message repeated over and again by the business community and it sunk in with Republicans and Democrats. Sometimes in politics, perception becomes reality.

Some of these complaints were surely exaggerated. There's no evidence that the moving vans are lining up in Barrington to carry the families of surgeons and business owners to Massachusetts or elsewhere.

Most Rhode Islanders don't know the way to San Jose. But House Speaker Gordon Fox said Rhode Island had become known as a high income tax state, and that dropping the top rate from more than 9 percent to about 6 percent would be an incentive ``for a business in San Jose [to move back] to Rhode Island.''

Well, what about those of us who live here now? If some people pay less under the new system, others have to pay more. The state estimates that about 300-thousand taxpayers will pay less, 100-thousand will see no change, and about 100-thousand will pay more. And even the experts admit that many Rhode Islanders will not be able to figure out where they stand until next year when they file their taxes -- well after the November elections.

Of course what the State House gives with one hand, it takes with another. Carcieri and lawmakers have balanced the state budget by slashing state aid to cities and towns by about $200 million over the past two years. To make up these cuts, lawmakers have allowed communities to raise car taxes in a very regressive manner that will hit poor and struggling Rhode Islanders hardest.

Call it the clunker tax .This will allow car taxes to be imposed on vehicles worth $6,000 or less, which for many years have been exempt from taxation. Because of this, a resident of Providence could end up with a $400 car tax increase, which would in most cases wipe out any income tax relief.

But the new car taxes will be imposed by mayors and town councils, not state lawmakers.
So it will allow the State House gang can to run for reelection and claim they didn't raise taxes - even if they did pass the buck. Will the people who vote and pay the bills remember in November?