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PROVIDENCE, R.I. -- While his potential opponents in the race for governor talk about freezing or repealing a controversial tax-break for the state's wealthiest taxpayers known as the flat-tax, Republican gubernatorial candidate John Robitaille is saying: Not so fast.
In a statement issued at 4:34 p.m. on Tuesday after his official workday as Republican Governor Carcieri's communications director was over, Robitaille spelled out the reasons he believes state lawmakers should leave the flat tax alone.
His arguments: "It's too premature to judge the effectiveness of the flat tax.... It would be unwise to make a knee-jerk reaction to solve a budget problem...Tax predictability is very important for both business and individuals. A sudden change will not instill confidence in government or in the economy.''
Beyond that: "We haven't seen the 2009 breakdown of how many taxpayers will use this alternative and what the differential will be for the tax year.''
Initially unavailable for comment, Robitaille weighed in belatedly after his potential competitors in the race for governor had all staked out their own positions.
Attorney General Patrick C. Lynch has called for repeal of the flat-tax option, adopted by lawmakers in 2006 in the hopes it would attract more jobs and industry to Rhode Island, because it hasn't worked.
Although the adoption of the flat-tax had been championed by Democratic House Speaker William J. Murphy, Lynch campaign manager Mike Mikus called the flat tax the latest example of the folly of trickle-down economics, based on the theory that "if you give tax cuts to the wealthy, they invest and they create jobs. Obviously, jobs have not been created, and the economy has gotten worse."
Democratic primary opponent General Treasurer Frank T. Caprio, is not willing to go as far. But a statement issued by his campaign said Caprio "supports freezing the flat tax, which, while intended to attract taxpayers, needs to be reconsidered in favor of providing the immediate assistance our existing small businesses need to retain jobs and create new jobs."
His campaign has been unable for several days to explain what "immediate assistance" means.
Independent candidate Lincoln D. Chafee has said the state needs to consider both: repealing the flat tax or at the very least, delaying the next scheduled rate reduction -- to help close the state's relentless budget gap, projected at $219 million this year and almost double that next year.
"Senator Chafee believes that the flat-tax revenue numbers must be carefully analyzed as to whether the program is working as intended -- is the math in the state's favor? While this analysis is being conducted, the phase-in should be suspended at its current level," his campaign manager John "J.R." Pagliarini said.
At issue is a phased-in tax break for top-earners that benefited 2,267 taxpayers in 2007. Of that total, 838 were residents and 1,429 were non-residents who live elsewhere, but draw income from Rhode Island. The number of beneficiaries is expected to hit 9,000 this year, after a drop in the flat-tax rate to 6 percent from 6.5 percent.
By simply freezing the rate at its 2009 level, the cash-strapped state could hold on to an estimated $17.9 million in tax revenues it would otherwise lose in the 2010 tax year.
Eliminating it altogether could save the state many millions more in lost revenues -- $56.2 million -- that would otherwise stay in the pockets of Rhode Island's top-earners.
In the final year of the phase-in in 2011, the projected state revenue losses are $79.13 million.
Two state lawmakers, Rep. Helio Melo, D-East Providence, and Scott Guthrie, D-Coventry, have introduced bills to repeal or alternatively, scale back the tax.
Robitaille's argument; "Any consideration of changing the flat tax must be in the context of a broader discussion of our overall tax policy that should include lowering the personal income tax brackets.'' He has not yet explained how he believes the state might do that, while wrestling with massive, back-to-back budget gaps.
Robitaille has served notice that he intends to resign as Carcieri's $129,705 a year communication director within the next several weeks, even though the state law barring state workers from running for office does not apply to political appointees and elected officers.
