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C. Eugene Emery Jr.
By C. Eugene Emery Jr. January 21, 2013

Chafee pushing for lower corporate tax, no cut in personal income tax proposed

When Lincoln Chafee ran for governor in 2010, both the Rhode Island and U.S. economies were in a bad way.

The state had one of the highest unemployment rates in the nation. Homes were being foreclosed. Rhode Island faced a huge budget problem thanks, in part, to pension systems that were racking up big bills and didn't have the funds to cover them.

In the midst of that, Chafee promised that, if elected, he would work to cut income taxes and the taxes paid by corporations.

But there was a big "if."

First, the economy would have to improve.

We"ve held off rating Chafee"s progress on this promise, waiting for clear signs of steady improvement.  In recent months, things have improved enough for us to issue a ruling.

Rhode Island's unemployment rate -- 10.2 percent for December -- is tied with Nevada for the highest in the country. But that"s still better than the 11.4 percent unemployment rate when Chafee took office on Jan. 4, 2011.

The state pension system was overhauled in 2011 after a bruising battle, although its fate is in doubt because of a court challenge.

The Federal Reserve Bank of St. Louis, which develops economic indexes for each state based on employment, average hours worked in manufacturing and wages and salaries, says that its data for Rhode Island show that the state has started to slowly recover after hitting bottom in December 2009.

University of Rhode Island economist Leonard Lardaro, whose Current Conditions Index looks at momentum in the Rhode Island economy, said, "The economy has already improved. It shifted into a higher gear for the whole of 2012, actually part of 2011."

Chafee himself asserted in December that there's been improvement because, in September, five key economic measures were positive for the first time since 2006, a statement we ruled True.

So has Chafee fulfilled his tax-cutting promise?

In his Jan. 16 State of the State address, the governor proposed a state budget that would start to chip away at the state corporate tax, cutting it from current 9 percent to 8 percent next January, 7.5 percent a year later and 7 percent a year after that.

He has not taken any action on the second part of his promise, to lower personal income taxes.

Because the promise was conditional on the economy improving, and because Chafee has moved on one front, we rate this promise In The Works. But as the economy continues to improve we"ll be watching for progress on the second half of his promise.

Our Sources, "Linc-O-Meter: Lower taxes on personal income and corporate profits when economy improves"

Providence Journal, "Picture of a state burdened," page E1, Oct. 17, 2010, "Local Area Unemployment Statistics: Rhode Island," Bureau of Labor Statistics, accessed Jan. 21, 2013, "Coincident Economic Activity Index for Rhode Island," Federal Reserve Bank of St. Louis, acessed Jan. 16, 2013

Interview, Leonard Lardaro, economist, University of Rhode Island, Jan. 15, 2013, "Current Conditions Index," accessed Jan. 15, 2013, "Rhode Island Governor Lincoln Chafee says five economic indicators tracked by the federal government were positive in October, for first time since 2006," True, Dec. 9, 2012

The Providence Journal, "Chafee proposes cut in corporate tax rate," A1, Jan. 17, 2013

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