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The proposed 2 percent additional tax on restaurant meals and beverages has emerged as the big headline from Gov. Lincoln Chafeeâ€™s 2012 budget. His notion that it would fund additional aid to school districts didnâ€™t seem to get as much ink.
My advice? Go someplace nice for lunch, order a good meal and a cocktail, and stop worrying about it. The tax ainâ€™t going to happen.
For the next couple of weeks, owners of restaurants and bars are going to scream bloody murder about how the governor is going to ruin their businesses. There will be legislative committee hearings, there will be press conferences and rallies and other events where the governor is going to be called every name except Lincoln. Then, just when the political heat gets high enough, General Assembly leaders will ride in on white chargers to assure the small business people of the hospitality industry that they wonâ€™t let that dirty rotten scoundrel of a governor get away with this outrage.
The meals tax proposal will be dead, dead, dead.
But what about the increase in state aid to local school districts that the 2 percent meals tax hike was going to fund? No problem, thatâ€™s going to happen, too.
Given the way the stateâ€™s revenue has been going, it is all but a sure thing that the $38 million Chafee estimates his 2 percent tax will raise is already going to be in the state coffers when the May Revenue Estimating Conference (the one the General Assembly uses to formulate its budget, as opposed to the October conference, with seven fewer months of actual revenues, that the governor is stuck using) comes up with its magic number.
The General Assembly knows that and -â€” you know what? â€” the governor knows it, too.
Chafee knew he was sacrificing his scant political capital (he was elected with 36 percent of the vote, remember) by proposing what was obviously going to be a wildly unpopular tax, in order to get the increased state aid â€” he wants to fully fund the second year of the phased in school funding formula plus $11 million, to help fiscally strapped cities and towns, particularly the distressed communities with high education costs â€” on the table.
Now, the General Assembly can eliminate the tax, but they are probably going to be stuck with adding the extra money to the school aid formula. They will get credit for both, while Chafee just gets blame for the tax, with extra points off for being perceived as politically weak for not being able to get the bad tax passed.
Chafee showed real political courage, to achieve a worthwhile goal, and all he is going to get in return is a bunch of political know-it-alls branding him as Governor Goofball, who proposes horrible tax increases only to get his lunch eaten by the General Assembly.
The problem here is the way we tax or, more accurately, the way we donâ€™t tax, in this state.
Chafee, a political Independent, like the supposedly Democratic leaders of the General Assembly, appears to have drank the Republican Kool-Aid on taxes.
Every year for so many years that I have lost count now, the General Assembly leaders march out every June after the budget has been passed to pat themselves and each other on the back with the hackneyed boast that â€” you can probably say this right along with me by now â€” â€śWe didnâ€™t raise any broad-based taxes.â€ť
Well, goody good good for them. What they did do however, year after year after year, is raise narrower taxes whose targets are low and middle income Rhode Islanders.
The broad based, progressive income tax, which would fairly spread the burden among Rhode Islanders, is a sacred freaking cow. Donâ€™t touch that one. No! No! No!
The General Assembly instead employs a bag of tricks, for instance, raising a tax they canâ€™t get blamed for, the local property taxes in 39 cities and towns.
Your property tax bill or, if it is your landlordâ€™s property tax bill, your rent, is going up, up, up every year. So that tax pretty much covers anybody who lives indoors. But it is not a broad-based tax because our legislative leaders say it isnâ€™t. And they are honorable men and women.
By voting to eliminate the automobile excise tax exemption, the General Assembly effectively raised a tax on every man and woman who drives a car. But that is not a broad-based tax, either, because our legislative leaders said it isnâ€™t, and they are honorable men and women.
The General Assembly leaders say they took care of the pension crisis at the state level, but there is a bigger, deeper morass in local pension plans. Why? Because to avoid raising broad based taxes, the General Assembly cut state aid to cities and towns by hundreds of thousands, or millions or even tens of millions, making it impossible for some communities to pay their required pension contributions and still keep cops and firemen on the streets and school teachers in classrooms. That is going to raise the taxes (again) of anybody who lives in about two-thirds of Rhode Islandâ€™s cities and towns. But no, you canâ€™t call that a broad-based tax increase because the leaders of the General Assembly say it isnâ€™t, and they are honorable men and women.
Chafee, as discussed, wants to raise a tax on anyone who eats at a restaurant, from the guy who sits in his car and chomps a Big Mac and Coke from the drive-thru, to the woman who orders a filet mignon and pomegranate martini at the Capital Grille.
Last year, Chafee was successful at getting a big increase in the parking fee a family has to pay to go to one of our state beaches.
What are the two big draws that attract out-of-staters to Rhode Island? Thatâ€™s right, our restaurants and our beaches. For a year or so, we can feast on those fat geese to avoid raising broad-based taxes, but somewhere along the line, we are going to start to miss those golden eggs that they used to lay.
Can you see the pattern here? By avoiding the broad-based taxes, we hit middle-and-lower-income working families where it hurts. A $200 or $300 increase in the annual car tax is merely an annoyance to a well-off person. It is an outright calamity to the guy who has a $8 or $9 an hour job. The well-to-do can take a property tax increase in stride. To the middle class family that is just hanging on, it means they could lose their home, if the bank isnâ€™t coming after it already.
Now the latest bright idea of the Chafee administration is tolls. Anybody who wants to get on or off Aquidneck Island is going to get whacked really good. The family who wants to splurge a little and go to Newport once or twice a summer? They have to factor in $10 for starters, just to get back and forth across the Newport Bridge. And if they try to sneak around the back way, there are plans to toll the Sakonnet River Bridge as well. Oh, yes, and the administration wants the federal government to give them the OK to toll Route 95 as well.
Instead of hiking the income tax by a quarter point, a tax that hasnâ€™t increased since Gov. Lincoln Almond lowered it in the 1990s, the General Assembly, along with this governor and the last one, are intent on nickel-and-diming us to death with taxes and fees that smack the middle and lower classes in the face, while at worst giving a light pinch to those in the upper-income brackets.
The hysterical fear that rich people are going to pull up stakes and move away â€“ hey, if they live in big, expensive houses, they arenâ€™t going to be able to sell them anyway â€“ is preventing Rhode Island from adopting a sane tax policy.
The old New England mill owners who founded many of our towns and villages used to pay puny wages to the people who worked for them, under the theory that if they made enough money to put some aside, they would eventually move away for new opportunity. Today, we cringe in fear that it is the factory owners who will move away and it is state government that is making sure the middle and lower income people are stuck here with no good options.
That probably explains why, in the last Brown poll 21 percent of Rhode Islanders say we are going in the right direction (they must be the ones with money) while 63 percent say we are on the wrong track (that would be the rest of us).