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Friday, December 1, 2017

How will the tax bill screw Rhode Island? Let us count the ways

By Bob Plain in Rhode Island’s Future

Image may contain: textThe Republican tax proposals would ill-serve Rhode Island in a variety of ways, said federal, state, and local officials who have been busy studying the copious and potentially crippling ramifications either the House or Senate bill could have on life in the Ocean State.

The effects range from increased economic inequality, cuts to the social safety net, downward pressure on the state’s ability to fund government, and even provisions that would make it more expensive for cities, towns, and schools to borrow money.



The legislative efforts are being pushed through Congress as income tax reform – a House bill already passed and the Senate is deliberating a separate bill currently.

But the net changes to Rhode Islanders’ income taxes, while demonstrably regressive, could prove small change in the grand scheme.

“This is not a tax reform plan,” said Democratic Congressman David Cicilline, in a recent speech from the House floor. “It’s a tax scam.”

One provision would raise municipal borrowing costs by eliminating a tax deduction on municipal activity bonds, which are used to finance public construction projects – like schools, roads and bridges, and other infrastructure, said House Majority Leader Joe Shekarchi, a Democrat.

“This proposal would do serious damage to Rhode Island’s cities and towns,” Shekarchi said. “Most of the attention is on who wins and who loses under the individual income tax provisions. But eliminating activity bonds is an under-the-radar way the Trump tax plan will affect regular people, because it’s ultimately going to lead to higher property taxes and less investment in public projects.”

Noting how this would affect impending school construction and road and bridge repairs, Shekarchi said Rhode Islanders will pay “millions of more in interest to bondholders, i.e Wall Street. That means less money for social spending.”

Brian Daniels, executive director of the non-partisan Rhode Island League of Cities and Towns, said the end of activity bonds is just one way the tax proposals could adversely affects cities and towns in Rhode Island.

“The House and Senate bills could impact other important financial tools for municipalities,” he wrote in an email, “including prohibiting advance refunding (basically allowing municipalities to refinance their debt at lower interest rates), eliminating the Historic Tax Credit, and removing the Federal tax deduction for state and local taxes.”


Meanwhile, Senators Jack Reed and Sheldon Whitehouse have called attention to the devastating cuts to social services and exploding increases to the federal deficit if the Senate version passes.

“It is unconscionable and unfair that the Republican tax bill raises taxes on working families, slashes benefits for seniors and others with high medical expenses, puts in motion billions in Medicare cuts, and throws 13 million Americans off their health care plans – all to provide massive tax cuts to the wealthiest Americans and multi-national corporations,” Reed said earlier this week at an event in Cranston.

“The Republican tax plan would run up huge deficits, trigger immediate cuts to Medicare, and threaten Social Security and Medicaid down the line,” said Whitehouse at the same event. “Rhode Island seniors have paid for these benefits over the course of their careers with the promise that they will be able to live with dignity during their golden years.”

Earlier today, Whitehouse tweeted that the tax cuts would deeply discourage efforts to quell the opioid epidemic.

Doug Hall, director of economic and fiscal policy at the Economic Progress Institute, faulted both the regressive nature of the tax changes and the associated cuts to social services.

“The tax proposals that Congress is currently considering are a cynical effort to get working families to support huge tax cuts for the very wealthy and for corporations by offering very modest short term tax cuts today, that morph into tax hikes for 38 million American families by 2027,”  said Doug Hall, director of economic and fiscal policy at the Economic Progress Institute.

“Even worse are the budget cuts to important programs and services that will be imposed to pay for the tax cuts for corporations and the wealthy. These tax cuts will undermine our ability to make the investments we need to put working families and the American economy on a path to prosperity.”


In Rhode Island, explained Hall, the average taxpayer in all income brackets would see a reduction in their taxes this year. But over time, the tax cuts remain for the richest Rhode Islanders and disappear for the poorest.

By 2027, Hall said, “the average taxpayer in the bottom 60 percent of filers (those earning less than $97,970, with average income of $45,400) will pay more in federal income taxes, while the average taxpayer earning more than $97,970 will pay less.

“Some taxpayers in every income category will see a tax hike in 2027 as a result of the Senate tax plan, including a substantial share of those in the bottom 95 percent of filers, ranging from 18 percent of filers with incomes between $32,240 and $56,560 to more than a third – 37 percent—of middle income earners.

“By contrast, the vast majority (97 percent) of the richest 1 percent of filers will see a tax cut, averaging $6,070.”

Bob Plain is the editor/publisher of Rhode Island's Future. Previously, he's worked as a reporter for several different news organizations both in Rhode Island and across the country.