In Rhode Island, Chafee Follows Through on Taxes

By: - March 9, 2011 12:00 am

While many governors decry tax hikes as “job killers,” Governor Lincoln Chafee of Rhode Island sees them as an essential part of his strategy to rebuild his state’s shaky finances.

Chafee, the nation’s only governor who is independent of both major parties, followed through Tuesday (March 8) on his uncommon campaign pledge to raise taxes. Delivering his first budget before a joint session of the legislature, Chafee proposed $157 million in higher taxes as part of a budget he says will put Rhode Island on a “path to prosperity,” The Providence Journal reports .

While the overall dollar amount associated with the tax increases is relatively small, Chafee is planning fundamental changes to the state tax code that are sure to spark debate. At the center of his plan, for example, is a measure to reduce Rhode Island’s sales tax from 7 to 6 percent while applying it to many items that are currently exempt, ranging from textbooks to caskets.

Chafee also wants to reduce the corporate income tax rate from 9 percent to 7.5 percent over three years.

Both moves, he told lawmakers, will help create an environment “that fosters broad economic growth,” noting that the sales-tax change would give Rhode Island a competitive advantage over Massachusetts and potentially Connecticut if lawmakers there raise the sales tax as proposed.

Chafee is part of a small group of governors who have pursued tax hikes this year. They include Democrats Jerry Brown of California, Dannel Malloy of Connecticut and Mark Dayton of Minnesota. Many other governors, most of them Republicans, have proposed tax cuts.

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