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R.I. governor seeks cuts in corporate, estate taxes

By Ray Henry
Associated Press / February 11, 2009
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PROVIDENCE - Governor Donald Carcieri proposed yesterday phasing out Rhode Island's corporate income and estate taxes and cutting personal income tax rates, saying it would spur the economy and create jobs in a state where 10 percent of workers are unemployed.

Carcieri described the tax-cutting proposals in his seventh annual State of the State address as one fix for a bitter recession that wiped out 22,000 jobs last year, decimated home prices, and pushed the state budget deep into the red.

Unemployment hit 10 percent in December, making Rhode Island the second-worst performer, behind Michigan.

The Republican governor has long urged cutting tax rates to make Rhode Island more competitive with neighboring Massachusetts and Connecticut, but his tax-cutting ambitions have grown as the economy sinks.

"I'm firmly convinced that if we dramatically change our tax structure, our economy will produce jobs," Carcieri said. "What Rhode Island needs now is more taxpayers, not more taxes."

Rhode Island would be in rare company if the Democrats, who hold a veto-proof majority in the General Assembly, approve Carcieri's plans. Three states - Nevada, South Dakota, and Wyoming - lack a corporate income tax or its equivalent, said Josh Barro, a staff economist at the nonpartisan Tax Foundation.

An advisory panel that Carcieri created to examine the state's tax structure suggested last week that Rhode Island could replace its corporate income tax with a cheaper franchise fee. But that change would cut $82 million in state revenue. Carcieri and lawmakers are already struggling to close a $357 million budget deficit for the year ending in June.

Carcieri has argued that reducing the tax burden would attract more businesses and entrepreneurs to Rhode Island. More businesses paying taxes would ultimately mean more revenue for the state, he said.

Democratic lawmakers seemed less certain.

"This year, as you know, it's going to be very tough to cut taxes," said House Speaker William Murphy, a Democrat. "We're in such a deficit."

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