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Chamber rallies to oppose tax plan

April 12, 2011

PROVIDENCE — The three dozen or so businessmen and women who filled the marble staircase of the Statehouse Rotunda Tuesday were quieter, better dressed and more well behaved than most of the demonstrators who regularly assemble there, and they seemed less than comfortable with the whole idea of speaking out and waving signs, but they were just as angry as many of the others who come to that spot to protest.
They were angry about Gov. Lincoln Chafee's sales tax plan, which would tax many of the goods and services they provide, transactions that aren't taxed now and in some cases never have been.
They say the governor's plan to lower the sales tax from 7 percent to 6 percent (with some other items taxed at 1 percent), but broaden it to an array of new goods and services would hurt their businesses, kill jobs, and perhaps even reverse Rhode Island's fledgling recovery from the Great Recession.
The late morning demonstration was organized by the Greater Providence Chamber of Commerce, but it included members of other chambers of commerce across the state, independent businesspeople and even Tea Party members. It is one of the few times in recent memory that businesspeople descended on the Statehouse en masse to bring their message to their government personally. Many business groups hire lobbyists to take care of that sort of work.
The governor's office has until now generally brushed aside such objections to the plan with no comment, but on Tuesday, Chafee himself came forward at a hastily-called news conference where he defended his sales tax change and challenged those who oppose it to come up with a better idea.
“If you don’t like my proposal,” Chafee said in response to his critics, “offer an alternative.”
When asked what they would suggest as an alternative to the sales tax program, the businesspeople recommended cutting state government spending, particularly on public employee pensions and cost-of-living adjustments.
Providence Chamber President Laurie White kicked off the proceedings by declaring, “We are the jobs-producing sector of our economy and we are the sector that is going to drive Rhode Island's economic growth and recovery from this very painful downturn.
“We are here today to say no to this sales tax proposal,” White said. “Frankly, we are very surprised by the sweeping nature of the proposal ... It vacuums $165 million out of our economy.”
She said the plan has “sparked hot and visceral debate,” among the chamber's member businesses.
The net result of the Chafee tax plan, White asserted, is that, “life would cost more at a time when salaries are not able to keep pace.”
Manufacturers, Realtors, security guards, executive search firms, temporary employment agencies, even artists and historical preservationists lined up to take rhetorical whacks at the governor's proposal.
Cindy Overton of the RI Trucking Association said the more than 700 member businesses that make up her group are “adamantly opposed” to implementing the sales tax change “because it will negatvely impact an already fragile business climate for every one of our members and most of our state's businesses.”
The protesters complained that the new sales tax structure would not only add to the cost they pay for the goods and services they need to conduct their business, and add to the price they have to charge their customers, it would also add the oppressive task of having to collect, account for, and deliver the extra tax dollars to the state.
Richard Hittinger of the Alliance Environmental Group called that “a tremendous administrative burden,” which would entail determining which of the services his company provides would carry no tax, which would be taxed at 1 percent and which would have a 6 percent sales tax.
“This will make a bad situation even worse,” said Al Lubrano, chairman of the RI Manufacturers Association. “What this will ultimately do is render us less competitive in the global markets where we compete. If that happens, it will cost us business. That's business we need to create jobs.”
Lubrano said, “the governor's proposed legislation and budget will add to the cost for the manufacturers by increasing taxes in key manufacturing components such as equipment, energy, precious metals and raw materials.”
In his press conference immediately after the business rally, Chafee told reporters, “There weren't a lot of constructive alternatives to the crisis we are in” offered by the opponents.
The governor ticked off several statistics to illustrate the depth of that crisis, suggesting that much of it was inherited from his Republican predecessor, Gov. Donald Carcieri:
“A $295 million deficit; the federal stimulus money is not coming this year, there is no more federal money to parachute in to bail us out; over the past three years, a $38 million cut to higher education; the Department of Motor Vehicles cut from 192 people down to 155 and closing branches from 11 down to five, try and register your car or trailer or get a license, it's torture (he added that such cuts are “typical across state government”); $195 million in cuts to cities and towns.
“It's no wonder,” Chafee said, “that Providence is awash in red ink, it's no wonder that Central Falls is in receivership, it's no wonder that Pawtucket had to come in and borrow money to meet payroll.”
On top of all that, the governor said, “the new governor inherited a labor contract that the previous governor negotiated that pushed raises off to this year.”
In planning his budget, Chafee said, “What I wanted to do is look to the long term. I did not just want to fix it for this year. I wanted to fix it for the out years.”
Chafee said that at a governor's conference earlier this year, Federal Reserve Chairman Ben Bernanke told chief executives from the 50 states that they would be better off if they broadened and lowered their sales tax, something Chafee said was already in the works for his budget proposal at the time.
He also noted that his budget makes investments, including a $10 million increase for higher education, $14 million to fully fund the school funding formula, $12 million to start weaning the state off bonds to come up with a match for federal highway fund, to help put a stop to the “wasteful interest” the state now pays on those bonds.
Asked about the allegation that his plan kills jobs, Chafee said, “Show me the evidence. No politician likes to raise taxes. They do it because they have to.”
He said the businesspeople criticizing his plan “are addressing the immediacy of today. They are not addressing the crisis we find ourselves in.”

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