Rhode Island Governor Proposes Positive Corporate Tax Reform

May 01, 2013

Plan Would Boost State’s Competitiveness   

Washington, D.C., May 1, 2013—Rhode Island Governor Lincoln Chafee’s proposed corporate income tax reduction is a positive move for workers, employers, and investors that will simplify the state’s tax code and make the Ocean State more economically competitive with its neighbors, according to a new analysis by the Tax Foundation.

The Governor’s plan would cut the corporate income tax from 9 percent to 7 percent over the next three years. If enacted, this would make the state’s tax rate the lowest in New England. Rhode Island currently shares the spot for the highest regional corporate tax rate with Connecticut and New Jersey.

To offset some of the projected revenue reduction from the tax rate cut ($5.3 million in 2014, $12.9 million in 2015, and upwards of $20 million in years thereafter), the governor’s plan would broaden the corporate income tax base by reducing corporate income tax carve-outs for particular firms and business sectors.

“Governor Chafee’s tax plan moves in the right direction by broadening the tax base to lower the overall rate for all firms,” said Tax Foundation economist Elizabeth Malm.

The Chafee proposal will help ensure neutrality and simplicity in Rhode Island’s tax code and decrease the incentive for companies to lobby for special tax treatment. Trading targeted tax incentives for a better tax system for everyone is positive tax reform, as is moving away from revenue sources that can harm growth and generate instability in a state’s overall revenue system.

Tax Foundation Fiscal Fact No. 367, “Rhode Island Governor Proposes Positive Corporate Tax Reform” by Elizabeth Malm, is available online.

The Tax Foundation is a nonpartisan research organization that has monitored fiscal policy at the federal, state and local levels since 1937. To schedule an interview, please contact Richard Morrison, the Tax Foundation’s Manager of Communications, at 202-464-5102 or morrison@taxfoundation.org.

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