Taxes are how we pay to make our shared vision for Rhode Island a reality.

Transcription

1 Rhode Island Revenue Roundtable Making Taxes Less Taxing: Tax Fairness and Revenue Adequacy April 18, 2017 Taxes are how we pay to make our shared vision for Rhode Island a reality. Most Rhode Islanders share a vision of what the Ocean State should strive for: great schools for our children, safe roads and bridges, vibrant communities, prosperous families, and access to quality and affordable health care, housing and child care. The primary way we pay for these things is through our taxes. 1

2 One taxpayer, and a set of budget choices requiring revenue = somethings gotta give Our Taxes in Context: $ and % of FY2017 General Fund Revenues ($M) 2

3 A Closer Look at The Income Tax 3

4 * In 2010, Rhode Island had an alternate flat tax rate of 6.5% 4

5 Rhode Island Connecticut Massachusetts Range of Tax Rates 3.75% to 5.99% 3.0% to 7.0% 5.1% flat rate Standard Deduction Single $8,300; Married $16, Personal Exemption $3,900 $14,500 ($24,000 married with dependent child) $4,400 ($8,800 married) Dependent Exemption $3,900 N/A $1,000 State EITC 15% of federal 27.5% 23% Retirement Income Exempts $15,000 of retirement income (TY17)?? 5

6 A Closer Look at The Sales and Use Tax 6

7 Some options to tweak the sales/use tax & excise taxes Expanding the base to include services generally makes the tax a little less regressive E.g. wealthier families more likely to make use of diaper service, as opposed to purchasing diapers. RIPEC proposing reducing sales tax from 7% to 3%. Doing so would blow a BIG hole in the state budget. Enhanced collection of use tax for online sales expected to generate significant new revenue 7

8 A[nother] Look at the Cigarette Excise 8

9 Recall our previous look at the cigarette tax Increase in Cigarette Tax to Yield $8.7m in new revenues Issues to Consider Excise tax per package State (national rank) of cigarettes New York (1) $4.35 Rhode Island (proposed $4.25 FY18) Connecticut (2) $3.90 Rhode Island (3) $3.75 Massachusetts (4) $3.50 Recall our previous look at the cigarette tax Cigarette Tax (issues to consider) Increasing cigarette taxes is generally smart health policy, but flawed fiscal policy. Geography matters when dealing with substantial consumption taxes If [in response to increases in cigarette taxes] smokers decrease the number of packs of cigarettes purchased, travel to lower cost jurisdictions to make purchases or buy cigarettes on the Internet in response to a home state excise tax rate increase, any increase in that state s tax revenue will be mitigated Cigarette Taxes and Cross border Revenue Effects: Evidence Using Retail Data. 9

10 A Closer Look at The Property Tax Why is the property tax a state issue? (and what are the implications for low/moderate income Rhode Islanders?) Property tax cap RI and MA (not CT), 42 states in total (after FY2013, property tax growth capped at 4.0%) Property tax circuit breaker (PTCBs) remains for elderly and disabled, no longer for non elderly lowincome 31 States (including MA and CT) have PTCBs Circuit breakers help offset the unfairness of a regressive property tax by identifying the individual taxpayers for whom property taxes are most burdensome and reducing their tax to a manageable level. ITEP,

11 Rhode Island is one of 42 states with TELs (tax and expenditure limitations) 11

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13 Governor s Motor Vehicle Tax Proposal 13

14 A Closer Look at the Estate Tax 14

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16 Putting it all Together 16

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18 Lower Income Families (bottom 20%) in RI Pay higher share of income in combined state and local taxes than neighboring MA & CT 7 th highest taxes on bottom 20% of families 18

19 Some cross cutting policy alternatives 19

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