Linc-O-Meter

Examine a 1-percent sales tax on items currently exempt from sales tax


"Rather than forcing our property taxes to rise across Rhode Island, we should carefully examine a two-tier sales tax. Other states have this system and it is working."

Sources:

"Chafee calls for new tax plan in run for governor," Providence Journal, Jan. 5, 2010

Subjects: State Budget, Taxes

Updates:

Chafee proposes two-tiered sales tax in his first state budget

Updated: Wednesday, March 16th, 2011 | By Peter Lord

When he launched his campaign for governor in January 2010, Lincoln D. Chafee surprised many by announcing a plan to increase taxes.

Chafee said then that state leaders should carefully examine the possibility of a two-tiered sales tax that would continue the 7-percent tax on many items and charge a 1-percent sales tax on the long list of exempt items that, according to a 2008 Division of Taxation study, account for more than $625.6 million in potential state revenue.

If all the exempt items were taxed at 1 percent, Chafee said, the state could raise an additional $89.4 million in revenue.

Many suggested that to even mention tax hikes would doom Chafee"s candidacy. But it didn"t. He beat some of his toughest tax critics.

When Chafee unveiled his first state budget March 8, he proposed lowering the general sales tax from 7 percent to 6 percent, to make Rhode Island competitive with its neighbors.  He also recommended the 1-percent sales tax on most, but not all, exempt items.

Still untaxed would be food, prescription drugs and medical devices. The 1-percent sales tax would be applied to such things as aircraft, recreational boats, commercial fishing vessels, textbooks and renewable energy projects. The new 6-percent sales tax would be extended to a range of previously exempt services, such as dry cleaning, beauty salons and movies. Altogether, the new taxes were designed to raise an estimated $157 million.

Chafee"s tax plans are a long way from enactment. They will face plenty of scrutiny and debate in the General Assembly and may be altered or rejected. But he clearly examined the state"s tax schemes and proposed new taxes somewhat similar to the plans he announced when he started running, more than a year ago.

So we rank this Promise Kept.

Sources:

Web site, "Details: Chafee"s proposed changes in R.I."s sales tax,” accessed March 15, 2011

Providence Journal, "Chafee calls for new tax plan in run for governor,”   Jan. 5, 2010

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