WOONSOCKET — Speaking at a business development forum Thursday, Gov. Lincoln Chafee hinted that he might withdraw his proposed hike in the meals and beverage tax if new revenue forecasts due in May are high enough.
“We’re hoping with those new revenue estimates we can work on the meals and beverage tax,” Chafee said. “Let’s hope those May numbers continue the positive trend they’re on.”
Chafee’s comments came during the latest in a series of forums designed to showcase government programs available to help small businesses prosper in a tough economy. Co-sponsored by the Rhode Island Economic Development Corporation and the Small Business Administration, the event took place at the Museum of Work and Culture, drawing a crowd of nearly 100 people, including a few restaurateurs.
The meals and beverage tax, currently eight percent, would rise to 10 percent in Chafee’s proposed $7.9 million budget. The proposal has gone over like a lead balloon with the hospitality industry, landing with a particularly audible thud among food purveyors in communities like Woonsocket, which are already competing against lower taxes on dine-out meals in bordering Massachusetts.
The leadoff speaker, Chafee didn’t set out to address the subject, but as he took the lectern, he said, “I know there are some people here who want to talk to me about the meals tax.”
Chafee made a philosophical argument in defense of the proposed tax, framing it as a more equitable revenue-raiser than property taxes because it’s discretionary.
In the last few years, he said, the state has cut aid to the most distressed cities — Providence, Pawtucket, Woonsocket, Central Falls and West Warwick — by a combined $195 million, creating a gap that’s largely been filled by increases in property taxes.
Invoking his “year of the cities and towns” budget theme, Chafee said the aim of the meals tax is to alleviate pressure on property taxes and improve the business climate.
“My firm belief is the property tax is the property tax is the biggest inhibitor of economic development,” said Chafee. “That’s where we’re out of whack.”
A string of officials from RIEDC and the SBA followed Chafee to the podium to talk about programs that are available to assist business owners with gaining access to capital, retraining workers and cutting through red tape.
Mayor Leo Fontaine served as moderator for the event, which drew not just local business owners, but a who’s who of state and local officials.
“The mission of the department is – ready for this? – we’re going to try to make it easier to do business,” said Leslie Taito, the director of regulatory and quality management for RIEDC.
After the session, a few entrepreneurs in the crowd said the presentation would be helpful in their current efforts to get a new business off the ground or keep an existing one healthy.
Longston Thepkaysone, who used to make and sell tee-shirts featuring original art from a downtown storefront, said he’s in the process of launching a new business in the Honan Block, at the corner of Ascension and Main streets. He said he intends to open a clothing store-art gallery combo at the site, and the RIEDC small business forum gave him some good leads on where to go for help.
“I know where to go, who to talk to about financing, developing a business plan,” he said. “And the whole forum is a good morale booster for the city.”
Some of the restaurateurs in the crowd left feeling less positive, however. Dave Lahousse, the owner of Kay’s Restaurant, never got a chance to talk to the governor about the meals and beverage tax, which Lahousse says is already too high compared to Massachusetts. In the neighboring state, he said, restaurant patrons pay taxes of just over 6 percent on their tab for eating out, a difference which already gives Ocean State dining venues “a perception problem.”
Standing beside Roger Savini, proprietor of Savini’s Restaurant, Lahousse said of the governor’s proposal, “We want that out of the budget.”
Savini said he knows people who have vowed not to eat in Rhode Island restaurants anymore if the meals tax goes up to 10 percent.
Local business advocates were sympathetic to the plight of the restaurateurs. City Economic Development Director Matthew Wojcik said the meals hike has been pitched as a 2 percent increase, but he dismisses the figure as “a bit of spin.”
“When you raise something from eight to ten percent, that’s a 25 percent increase, right?”
John Gregory, the executive director of the Northern Rhode Island Chamber of Commerce, addressing the crowd, said he supports the governor’s goal of providing relief to distressed cities, but it should not come at the expense of hospitality industry.
“We know cities and towns need more help,” he said. “But it can’t be on the backs of businesses. There have to be other alternatives.”