The Rhode Island Association of Realtors used its annual legislative open house at the State House to lobby against Governor Chafeeâ€™s sales-tax proposal. Sen. David Bates, R-Barrington, is at left and Rep. Brian Kennedy, D-Hopkinton, is at right.
The Providence Journal / Connie Grosch
PROVIDENCE â€“â€“ One night last week, Susan Arnold stood outside Governor Chafeeâ€™s State House office next to a large white cardboard house, sitting atop a table.
Stickers and Post-Its noted the sorts of services that a homeowner would pay a sales tax on, if a plan proposed by Chafee is approved by theÂ General Assembly: Cleaning the chimney. Hiring a moving service. Hiring a locksmith.
The governorâ€™s proposal would affect home ownership â€œin a big way,â€ said Arnold, CEO of the Rhode Island Association of Realtors. â€œHomeowners donâ€™t even know what is going to happen once this bill passes,â€ she says. â€œIt means taxes on their home heating oil. Their water. If a tree falls through their window and they need that window replaced? Itâ€™s a six-percent tax. You want your tree pruned? Thereâ€™s a six percent tax. Your lawn mowed? And on and on and on. You just canâ€™t make it up. Itâ€™s unbelievable.â€
The Realtors are not alone in publicly opposing the plan.
Since Chafee unveiled his proposed $7.6-billion budget for the next fiscal year last month, a wide range of business owners, industry associations and taxpayer groups have come out against his sales-tax proposal, perhaps the most controversial part of the plan.
Manufacturers, security firms, movie theater operators, the arts community, newspapers, hotel and tourism businesses, private universities and hospitals have been circulating petitions and encouraging their members to contact their legislators.
House and Senate leaders say theyâ€™ve been inundated with e-mails and correspondence, many against Chafeeâ€™s proposal.
The opposition has begun coordinating efforts in advance of two public hearings on the sales-tax plan: a Wednesday House Finance Committee hearing and a Thursday Senate Finance Committee hearing.
The Greater Providence Chamber of Commerce and others plan to gather at the State House on the Tuesday before the hearings, and the Rhode Island Trucking Association and other industry groups are offering a free shuttle service to and from Warwick for those who want to testify on Wednesday.
â€œItâ€™s going to be one of the largest gatherings of business and nonprofit leaders that weâ€™ve seen in the last couple of years,â€ said Laurie White, president of the Greater Providence Chamber of Commerce. â€œPeople are beginning to understand what this will mean to their particular industry and they donâ€™t like it.â€
Chafee proposes a two-tiered sales tax to raise about $165 million in new revenue, helping close a $295-million to $331-million budget gap in the fiscal year that starts July 1.
He wants to lower the current rate from 7 percent to 6 percent and broaden the tax to include a long list of currently exempt items and services, such as eyeglasses, nonprescription drugs, movie tickets and car repairs. He also proposes a new 1-percent sales tax on a smaller list of currently exempt goods, such as coffins, water for residential use and manufacturing equipment.
The plan immediately galvanized some of the stateâ€™s business and community leaders.
Veteran State House lobbyist Terrance S. Martiesian, who represents a number of industries affected by the proposal, sees the opposition as a grass-roots movement. â€œI donâ€™t think people are necessarily running around hiring lobbyists. Itâ€™s taking a course of its own. Itâ€™s coming from the Rhode Island citizens,â€ said Martiesian, who represents movie theater operators, the hospitality industry and others.
Among the first to organize were hair salon owners, beauticians and hairstylists, who formed an opposition group on Facebook and held a forum attended by hundreds.
Newspapers, including The Journal, have written scathing editorials and run a series of op-ed columns in opposition. In recent weeks, many have also published full-page advertisements denouncing the plan.
â€œI see our role as being advocates for these smaller, local businesses that do not have a lobbyist to represent them at the State House and do not have a way to get heard,â€ says John I. Howell Jr., publisher of the twice-weekly Warwick Beacon and the weekly Cranston Herald.
Meanwhile, movie theaters have posted petitions in their lobbies, and local chambers of commerce have posted online ones.
â€œWe just try and inform the customers about the tax increase and let them know that if it goes through, ticket prices will go up,â€ says Jim Halloran, a manager at Cinemaworld in Lincoln, where an employee has been posted at a table during the busy evening hours giving out information about the tax plan. â€œIâ€™ve been in theaters about 16 years, and this is the first time I have seen anything like this.â€
And organizers for the Rhode Island Tea Party say the groupâ€™s third annual â€œTax Dayâ€ rally Friday at the State House will target Chafeeâ€™s sales-tax plan specifically.
â€œYouâ€™ve got everything from salon owners to the security industry,â€ said Colleen Conley, the local Tea Partyfounder. â€œYouâ€™ve got people who are probably very different politically and they are all standing together saying, â€˜Wait a second, this is untenable.â€™ â€
Richard Licht, director of the state Department of Administration and Chafeeâ€™s de-facto spokesman on all things sales tax, is not surprised by the backlash.
â€œYes, I understand the opposition. That youâ€™re a hairdresser and your service was never taxed before and now it will be taxed,â€ he says. â€œBut that still doesnâ€™t mean itâ€™s not fairer and a better system.â€
Licht remains optimistic taxpayers will ultimately embrace the governorâ€™s budget plan because it balances revenue-raising proposals with budget cuts. He and others point out that the idea of broadening the sales tax has a long history.
Indeed, talk of lowering and broadening the sales tax has been a sort of annual rite at the State House. But every year, business owners have come out in force and state lawmakers have backed down.
Labor unions and advocates for low-income people â€” among the few constituencies likely to stand in support of Chafeeâ€™s tax plan â€” hope this time will be different.
Kate Brewster, executive director of the Poverty Institute at Rhode Island College, says her organization favors revenue-generating proposals that help low-income families rather than budget cuts that trim the services they rely on. â€œIf another $165 million is proposed to be cut from this state budget, some of that will come from human services, and if you take away a familyâ€™s access to subsidized child-care or health care, their bottom line is going to be much worse than paying more sales tax,â€ she said.
Nationally, only one other governor â€“â€“ Connecticutâ€™s Dan Malloy â€“â€“ has proposed sales-tax changes that approach Chafeeâ€™s wide-ranging plan, according to Michael Mazerov, a senior fellow at the Center on Budget and Policy Priorities, a nonprofit think tank studying policies that affect low- and moderate-income families.
(Malloy proposes raising Connecticutâ€™s sales tax from 6 to 6.25 percent, and broadening it to include currently exempt items such as car washes, haircuts and non-prescription drugs.)
Mazerov believes changes in the Ocean State are long overdue. â€œRhode Island, in particular, has a very, very narrow sales-tax base relative to other states,â€ he said.
Like the Chafee administration, supporters challenge detractors to propose a better solution.
â€œThe question is: who has a better alternative? If you are against it, what is your alternative and please be specific,â€ says Robert Walsh, executive director of the National Education Association of Rhode Island, one of the stateâ€™s two largest teachers unions. â€œWeâ€™re well beyond the point where we can both have services and not have a way to pay for them.â€
Kate Brock, of Ocean State Action, says the pro-union advocacy group generally supports the plan, even if it has concerns about some of the items, such as the 1-percent tax on home heating oil. â€œWould I have liked to have seen more closing of corporate tax loopholes? Of course,â€ she said. â€œBut this is the option that we have to work with, and we should work to make it better.â€
KEY POINTSWhat new taxes would raise
The Chafee administration has calculated how much the state would raise from applying a sales tax to goods and services that are currently exempt. Here are the top generators.
$23.3 million: Services to buildings and dwellings (extermination, landscaping, etc.)
$19 million: Employment agency services
$18.6 million: Personal-care services (haircuts, weight-loss programs, etc.)
$18.2 million: Motor vehicle repair, including car washes
$10 million: Amusement parks, campgrounds and recreational sport centers
$42.2 million: Purchases used for manufacturing, including precious metal bullion
$10.6 million: Sales to charitable, religious or educational organizations
$6.6 million: Clothing and footwear
$2.8 million: Manufacturerâ€™s machinery and equipment
$2.6 million: Agricultural products for human consumption
SOURCE: State Department