Rhode Island missed
out on somewhere between $40 and $100 million in 2011 and 2012, according this new report.
That’s because in 2011, the General Assembly rejected Gov. Chafee’s idea to
implement what is known as “combined reporting” for corporate taxes and instead
called for the aforementioned report.
The study found that
combined reporting would have earned Rhode Islanders between $23 and $54
million in 2011 and between $21 and $44 million in 2012, depending on the
accounting method used. The larger number focuses on just sales while the
smaller number also factors in payroll and property. Read the overview here and watch video from March 18 of
state Division of Taxation employees explain it the Senate Finance Committee.
Rep. Teresa Tanzi, a
progressive Democrat who represents Narragansett and South Kingstown, has
sponsored legislation this year and in the past two legislative sessions that
would implement combined reporting.
“The fundamental
justification for combined report is a robust corporate tax that can’t be gamed
by aggressive corporate tax planning while creating a level playing field
between big multistate corporations and smaller, local corporations,” she said
in an email to me. “Nonetheless, I am gratified that the study confirmed
that Combined Reporting would give a modest boost to revenues that could be
used to help the state address its unmet needs, and we now have the numbers to
show the advantage certain corporations have.”
Most local businesses
would not be affected by combined reporting, according to the study. It found
28 percent were negatively affected and 6 percent experienced a tax advantage.
“Any company that has
a large presence here, property and payroll, is not really affected,” state Tax
Director Dave Sullivan told the Senate Finance Committee last night. “companies
that do not have a big footprint here and have maybe one or two retail outlets
here may actually see an adverse effect in tax increases with single sales
factor. If all their property and payroll are out of state and they have a
significant number of sales because they have, we use the example of big box
stores here in this state…”
Massachusetts and
Vermont both implemented combined reporting in the same year they lowered their
overall corporate tax rate. State tax officials told the Senate Finance
Committee both states improved their Tax Foundation rankings after doing so.
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.