Lawmakers concerned by Mass. tax plan

PROVIDENCE, R.I. (WPRI) - Massachusetts Gov. Deval Patrick’s plan to significantly reduce the state sales tax could have a negative effect on Rhode Island, several state lawmakers said Wednesday.

“I think it would have an obvious immediate consequence for us,” Senate Finance Committee Chairman Dan DaPonte told WPRI.com.

During his State of the State address last week, Patrick proposed lowering the sales tax from 6.25% to 4.5% while increasing the income tax from 5.25% to 6.25%. All told, Patrick’s proposal would create $1.9 billion in new taxes.

DaPonte acknowledged that raising the income tax could potentially drive people away from Massachusetts, but said Rhode Island should still be concerned about the sales tax changes. He said he would continue to monitor the proposal, but he plans to concentrate on Gov. Lincoln Chafee’s proposed budget.

“Their sales tax is already lower than ours,” DaPonte, D-East Providence, said. “I think we’ll still focus on what we have to do.”

Rhode Island currently has a 7% sales tax.

But other lawmakers said Patrick’s proposal would give retailers in close proximity to Rhode Island a distinct advantage. State Senator Dawson Hodgson said he believes the plan should open the door for more tax policy discussion on Smith Hill.

“This may be a catalyst to reexamine the Rhode Island House Republicans’ sales tax proposal more closely,” Hodgson, R-North Kingstown, said.

Last month, House Minority Leader Brian Newberry said he was researching a plan to eliminate the sales tax altogether. Newberry told WPRI.com he is still considering proposing that a study commission be created to look at abolishing the sales tax.

Newberry said he is concerned about what a reduced sales tax in Massachusetts would do to Rhode Island.

“Look at how many people live within five minutes of the border,” Newberry said. “The one thing we cannot have is our sales tax being a lot higher than our neighbors.”

In 2011, Chafee proposed lowering and broadening the state sales tax in attempt to become more competitive with Massachusetts and Connecticut, but the plan was shot down by the General Assembly.

Last week, Chafee proposed reducing the corporate tax rate from 9% to 7% over the next three years, which would give the state the lowest corporate tax in New England. During a taping of WPRI 12’s Newsmakers last week, he admitted to being surprised by Patrick’s proposal.

“First we have to analyze exactly what he’s proposing and the chance of passage in Massachusetts and we’re doing that now,” Chafee said.

Dan McGowan ( dmcgowan@wpri.com ) covers politics and the city of Providence for WPRI.com. Follow him on Twitter: @danmcgowan