Rep. Larry Valencia, D-Charlestown, plans to introduce a bill this week that would roll back Bush-era tax cuts for Rhode Island's wealthy to rein in the state's projected $331 million budget deficit. The bill, which is still being drafted, proposes increasing income tax rates for married couples earning over $250,000 and individuals earning over $200,000 by 4.1 percent — the same rate by which they were lowered when the cuts became law in 2003.
The bill is an alternative to the sales tax expansion proposed by Gov. Lincoln Chafee '75 P'14 in his budget for the next fiscal year. Chafee's plan would raise $165 million by lowering the state sales tax to 6 percent, taxing some currently exempt items and services at that rate and imposing a 1 percent sales tax on other exempt items.
"My bill shines a light on the fact that the poor are getting poorer while the rich are getting richer," said Valencia, a member of the House Finance Committee. "I think we should start doing something about it." Chafee's proposal to expand the sales tax would hit the state's poor the hardest, he said.
But Valencia is not optimistic about the bill's chances for success. He said he sees the legislation as a progressive option that could be incorporated in a more centrist bill. "I can't see the General Assembly approving (the bill) without also approving some sort of sales tax reduction or other reduction," he said. "I hope that it will open discussion in an environment that's generally conservative."
That discussion has already started. House Speaker Gordon Fox, D-Providence, has solicited requests for alternatives to Chafee's sales tax modifications, which he has called "unacceptable."
"Rep. Valencia's bill will definitely be looked at as part of the budget process as a whole," said Larry Berman, Fox's director of communications. "We're going to look at every way to find savings and go from there. … It's a work in progress."
Three weeks ago, Ocean State Action, a liberal Rhode Island lobbying coalition, proposed implementing a 2 percent tax increase on incomes over $500,000. That proposal was taken up by Rep. Scott Guthrie, D-Coventry, and introduced as the "Patriot Tax." The bill is currently under review by the House Finance Committee.
The "Patriot Tax" should be part of a comprehensive approach to deficit reduction, said Kate Brock, executive director of Ocean State Action. "Other action would need to be taken in addition to this bill."
Other alternatives to Chafee's sales tax plan include a bill introduced by Minority Leader Robert Watson, R-Greenwich, which calls for further cuts to the Department of Health and the Department of Human Services.
Students are also entering the debate. Last week Aaron Regunberg '12 organized a canvassing campaign in Fox's district in support of Valencia's bill. Fifteen students worked a phone bank, and four canvassed door-to-door, according to Regunberg. He estimated that their efforts reached at least 400 households.
"The responses we got from Fox's constituents were overwhelmingly positive, and a bunch of them either called up the Speaker's office right in front of our volunteers or committed to doing so tomorrow," he wrote in an email to The Herald. "I think we can build some real grassroots support for this bill, and translate it into real grassroots pressure on the House and Senate leadership."
Regunberg said he supports Valencia's bill over the Patriot Tax because it restores revenue lost to tax cuts rather than adding a new tax.
Chafee communications aide Samuel Lovett said Chafee disapproves of the Bush tax cuts but declined to comment on whether the governor felt Valencia's bill was a viable alternative to the proposed sales tax changes. As a U.S. senator, Chafee voted against tax cuts signed into law by President Bush in 2001 and 2003.
Valencia plans to introduce the bill Wednesday, at which point it will be added to the Finance Committee calendar. He said the bill will likely be heard in May.
