Chafee ’75 proposes lower corporate tax

The governor’s proposed budget would provide more funding for schools and infrastructure

City & State Editor
Thursday, January 24, 2013

Gov. Lincoln Chafee ’75 P’14 proposed no tax increases of any kind in his State of the State address Jan. 17, despite having spent much of his first two years in office plagued by an ailing economy and confronting budget deficits. Toward the end of the speech, Chafee reiterated his desire to see the General Assembly legalize same-sex marriage, which will come to a vote in the House today.

Chafee said the state’s fiscal health had improved to a point where he could comfortably propose reducing the corporate tax rate from 9 percent to 7 percent to improve the state’s famously hostile business climate. The current corporate tax rate is higher than that of any other New England state, but the proposed rate is lower than those of neighboring Connecticut and Massachusetts. The new rate could make Rhode Island more attractive to business leaders, possibly helping the state lower its 10.2 percent unemployment rate — the country’s highest at 2.4 percentage points above the national average.

Chafee said he expects to face criticism for the decision — unemployment remains high and social services have been cut in recent years. But he “would not make this recommendation if (he) did not truly believe that in the long run it will result in a stronger economy, more Rhode Islanders working and fewer … citizens in need of state support,” he said.

The total budget Chafee submitted to the General Assembly amounts to about $8.2 billion in state spending, a 1.2 percent increase over last fiscal year. It would provide an additional $30.3 million to fully fund the state’s public schools. Chafee used the state’s school aid formula — passed in 2010 with support from Rhode Island Commissioner of Elementary and Secondary Education Deborah Gist — to determine the amount of funds the state must provide its public schools.

It also provided an additional $6 million to prevent tuition hikes at the Community College of Rhode Island, the University of Rhode Island and Rhode Island College, but the additional funding would only keep tuition stable if matched equally by spending cuts at each of the schools, Chafee said. He also requested $14 million to fund vocational schools.

Chafee also promised to address high municipal property taxes with $30 million in local aid to prevent cities and towns from needing to raise taxes further. Priority for the funds will go to areas still in critical condition following the economic recession, with a third designated for improving local roads.

In addition to proposing more than $11 million for shovel-ready infrastructure projects, Chafee called on the General Assembly to provide $500,000 to the I-195 Redevelopment District Commission. The commission is playing a major role in restructuring the Jewelry District, where government officials hope to create a technology, education and entrepreneurial hub to help revive the local economy. “We must continue to focus on … the ‘meds and eds’ … to grow our economy and create jobs,” Chafee added.

“Two years ago, when I was sworn in as governor, Rhode Island was facing a $295 million deficit … our unemployment rate was 11.4 percent … (and) we had lost 40,000 jobs in the previous four years,” Chafee said, marking his administration’s progress toward improving the economy after raising taxes and cutting social services. “Two years later, unemployment is heading in the right direction — still unacceptably high, but improving.”

Analysts predict Chafee will face reelection in 2014 with tough challenges from both the right and the left.

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