Americans for Tax Reform President Grover Norquist sent a letter to Rhode Island legislators today urging them to support the "Sales Tax Repeal Act of 2013". The legislation would completely repeal the state's sales tax, thus creating a more competitive enviornment for both businesses and consumers. The letter reads as follows:
I write today in support of the Sales Tax Repeal Act of 2013. By being the first state in the nation to completely eliminate its sales tax, Rhode Island would immediately begin to reverse course on decades of uncompetitive and anti-growth tax policies that cripple the Ocean State economy.
This bipartisan legislation has the potential to create 20,000 new jobs while letting taxpayers keep and spend an additional $1 billion of their own hard-earned income. Everything from household appliances to dining out and clothing would be made less expensive by the Sales Tax Repeal. The increased economic activity driven by lower prices would be a boon to a state that loses business to neighboring states with more competitive sales tax rates.
Consumers should have a reason to shop in state instead of resorting to online purchases and traveling to purchase goods in neighboring states Massachusetts and Connecticut. The small size of Rhode Island opens it up to lost business as taxpayers can easily purchase less expensive goods without real effort in these neighboring states.
As Massachusetts, in particular, considers lowering their state sales tax to 4.5 percent, the potential for lost business among consumers is significant. Cross border purchases will have the predictive effect of lost revenue for the state, a legitimate concern that should jump start the real debate on this proposal.
This bill has another added benefit. Given Congress’s current consideration of the Marketplace Fairness Act (MFA), Rhode Island consumers would be the biggest winners in an unfortunate circumstance under which the federal bill passed. Because the federal legislation requires larger online retailers to charge sales taxes on consumers nationwide, a repeal of the state sales tax would protect Rhode Island taxpayers from higher costs associated with MFA. The sales tax repeal would further encourage in-state purchases in this regard.
Dynamic growth estimates suggest the loss of revenue to the state government is nowhere near the huge and unrealistic number some opponents claim. In fact, by not spending this year’s state surplus and freezing spending, the legislature would not have a long way to go in terms of finding other budget cuts to compensate for initial revenue losses.
North Carolina, Wisconsin, Indiana, and Florida all are working to provide friendlier environments for Rhode Island businesses and taxpayers. As other states across the country work to cut taxes, to remain competitive, Rhode Island should follow suit.
Whether this bill’s full impact is phased in over several years or adopted as written, it is a bold move in the right direction. The full legislature should have the opportunity to debate this bill’s merits which include more jobs, more investment, and a reduced burden on Rhode Island taxpayers.
To view a PDF copy of the letter, click here.