The Rhode Island Business Coalition (RIBC) held a press conference this week to argue against proposed personal income tax increases for high-income earners and taxes on the federal Paycheck Protection Program loans in the state.
“This is neither the time, nor is it even necessary, nor is it good tax policy,” said John Simmons, RIBC spokesman.
The organization released a statement opposing the proposed taxation.
“The PPP loan was a lifeline for small businesses in Rhode Island and provided direct aid which enabled businesses to pay rent, utilities and, most importantly, employ the thousands of people in Rhode Island who depend on these jobs,” the coalition said in a joint statement.
The RIBC is a coalition of trade associations, chambers of commerce and other industry organizations representing businesses and employers within the state.
“Most states are not taxing businesses for the PPP loan forgiveness, which is a direct tax on small businesses in Rhode Island,” according to RIBC. “The majority of businesses in the state face uncertainty and we urge the members of the General Assembly to reject these proposals and support job creation and a healthy business climate.”
The RIBC has been in operation since 2013. The group coordinates legislative and administrative positions on behalf of the coalition, not individual members, and promotes legislation that encourages economic development, job creation and a strong business climate.
Although the House and Senate versions of the bills differ slightly, each adds one new tax bracket for purposes of Rhode Island state income taxation.
A proposed tax on PPP loan forgiveness has also been proposed.
Michael DiBiase, president and CEO of the Rhode Island Public Expenditure Council (RIPEC), argued that a recently announced rosier state budget outlook should negate the need for tax increases.
“Based on announcements by state budget officials over the past couple weeks, we have learned that over this fiscal year and next fiscal year, there is over a half a billion dollars in surplus state revenues,” DiBiase said.
Rhode Island Gov. Daniel McKee recently lauded projections that a state budget deficit is shrinking, and a revenue surplus may be on the horizon.
“This surplus assumes no tax revenues from PPP loans; a reversal from the revenue estimates at the time Gov. McKee submitted his budget,” DiBiase said.
Earlier this week, McKee backtracked on his support of higher tax brackets, following an announcement from the Office of Management and Budget.
The office now projects a revenue surplus in excess of $416 million for fiscal year ending June 30, and nearly $150 million in additional revenues for FY2021-22, according to the May Revenue Estimating Conference.
The newest numbers do not include revenue from the $1.78 billion in Federal stimulus funds, PPP forgiveness or the income tax proposals, according to RIBC.
“And the surplus does not include the massive additional funding available to the state under the American Rescue Plan Act,” he said, adding that the plan includes more than a billion dollars in discretionary funds and a half billion dollars for education.
“Why would we raise income taxes, when the state is awash in revenues?” DiBiase asked. “Why would we reverse the gains we have made in improving our tax climate for business, at a time when we are struggling to recover our economy? Why would we tax PPP loans, which are essentially federal grants, when the federal government and most states have decided that taxing these loans is bad policy?”
McKee has recently announced the narrowing of a previously projected state budget deficit. Newly available federal funds may also contain a windfall for Rhode Island.
“The issue of taxing PPP loans was proposed in Governor McKee’s budget and is being considered as part of the budget deliberations,” said Speaker of the RI House, K. Joseph Shekarchi. “The state tax only applies to a very small number of companies that received forgivable loans over $150,000 and recorded a profit. Those companies that did not record a profit would not be taxed.”
John Hazen White, Chairman of Taco Comfort Solutions, called Rhode Island “one of the least business-friendly states in the country.”
White, however, was born and raised in the Ocean State, and has chosen to do business in his home state for more than 30 years.
“We love Rhode Island,” he said. “We love Rhode Island! And the best thing, is when Rhode Island loves us back.”
Laurie White, President of the Greater Providence Chamber of Commerce, criticized legislative efforts to hike the personal income tax. She made two key points.
“First that our economy is still extremely fragile,” she said. “Now is not the time to raise taxes.”
Pending bills propose adding a new tax bracket for the state’s top earners making more than $475,000 annually, increasing their income tax rate from 5.99 to 8.99 percent.
White argued that although higher wage earners are fewer in overall number, they pay a substantial share of state income taxes, and create jobs in the state.
“Our neighborhood businesses are struggling just to continue operations,” she said. “Rhode Island is still down more than 40,000 jobs from the peak of the pandemic, so now is not the time to impose additional tax burdens on Rhode Islanders.”
White warned that high income earners are also the most responsive to tax increases, and that they are may be willing to move to other states with more friendly tax laws.
Many RIBC members argued that working during the pandemic proved how easily employees can work from remote locations. Businesses are now reconsidering the physical locations of their headquarters, and may be looking to relocate to states with friendlier business climates.
“The tax on high-wage earners is under consideration and the House Finance Committee has heard lots of testimony, both pro and con,” Shekarchi said. “I applaud all advocates for getting involved in the legislative process and we value the opinion of the business community.”