Carcieri's budget: Lower taxes

PROVIDENCE, R.I. (WPRI) - Governor Don Carcieri's much-awaited budget plan -- covering $7.6 billion -- would drop taxes for residents and businesses. Closing the deficit gap would hopefully happen thanks to the millions of dollars from the federal stimulus package.

Carcieri's budget proposal was delayed at least twice, for discussion of the federal stimulus with the General Assembly.

Hundreds of millions from the federal stimulus plan would go to shore up drops in state tax revenue and cope with the recession that's left 10.3 percent of Rhode Island's workers unemployed -- one of the worst rates in the country.

The Governor has proposed major tax reforms to the corporate tax, personal income tax and the estate tax over the next several years.

"For too long, Rhode Island has been at a competitive disadvantage. That must end if we are to grow our economy and create good-paying quality jobs. By lowering both personal and corporate tax burdens, we are sending a clear message that Rhode Island is open for business. It's private business that creates jobs and wealth in this nation, and we need a tax policy that encourages businesses to locate and expand in Rhode Island," said Carcieri.

Under the Governor's FY 2010 Budget, the corporate income tax will be reduced from 9.0 percent to 7.5 percent, effective January 1, 2010. The corporate tax rate will continue to be phased out in stages, with the complete elimination of the tax by January 1, 2014, as follows:

• 6.0 percent effective January 1, 2011
• 4.0 percent effective January 1, 2012
• 2.0 percent effective January 1, 2013
• Eliminate the Business Corporation Tax effective January 1, 2014

"We have to grow our economic base if we are to grow revenues," continued Carcieri. "The only way to grow our economic base is to become business friendly and encourage robust economic development and job creation."

Carcieri says cutting tax rates will make the Ocean State attractive to more entrepreneurs and businesses -- and more business means more jobs.

The proposed budget also calls for the increase in the exemption for the estate tax. Currently, Rhode Island has the lowest exemption, at $675,000, in the country. Neighboring Massachusetts allows for $1,000,000 estate tax exemption.

The Governor is seeking to increase the exemption amount for Rhode Island Estate Tax from $675,000 to $1,000,000, effective January 1, 2010.

The Governor proposed reforming personal income tax to make Rhode Island's tax system competitive with those in Connecticut and Massachusetts.

Under the Governor's proposal, Rhode Island would have four taxable income brackets, ranging from 3.5 percent to 5.5 percent.  The Governor's reform of the personal income tax will take effect January 1, 2011.

Critics say the state can't afford to take in even less tax revenue during the recession.

Cigarette taxes would go up to $3.46 a pack -- which would be the highest rate in the country. It's an idea Carcieri floated earlier in the year, but he was shot down by lawmakers.

The federal stimulus cash would also pay for a $10 million settlement with the 200 survivors and the relatives of the 100 victims killed in The Station nightclub fire back in 2003.

Carcieri's budget is based on tax recommendations from the Department of Administration.

Democratic leaders hold a veto-proof majority in the General Assembly, and can rewrite the governor's proposals.