It remains to be seen whether Rhode Island will do away with its 7 percent sales tax, but the conversation is underway.
State Rep. Jan Malik, a Democrat who represents Dist. 67 in Warren and Barrington, introduced legislation earlier this month that would eliminate the state’s sales tax as of Oct. 1. The bill also calls for the end of Rhode Island’s meals and beverage taxes.
At the heart of Rep. Malik’s proposal is a belief that Rhode Island is at a competitive disadvantage with other New England states that have lower or non-existent sales taxes, especially border communities.
Rep. Malik has owned Malik’s Liquors, in Warren, for about 30 years. The store is only a few miles from Swansea, and Rep. Malik said his business is down 20 percent over the last two years since Massachusetts eliminated its tax on alcohol.
He doesn’t think he’s alone, either.
“This is for everybody in the state of Rhode Island,” Rep. Malik said.
“I won’t be happy until Rhode Islanders in business are at an advantage over neighboring states.”
State Sen. David Bates (R-Dist. 32, Bristol, Barrington, Riverside) is a co-sponsor of similar legislation in the senate. Sen. Bates said he believes the proposal is part of a large conversation on taxes as a whole. He has previously introduced bills dealing with the state’s corporate tax and maximum personal income tax.
“I think it’s important to get the ball rolling,” he said.
Rep. Malik said he’s not fixated on reducing the tax to “0” but felt it’s an important conversation for the state to have, especially with a proposal in Massachusetts to lower that state’s sales tax from 6.25 to 4.5 percent.
“[That] would absolutely kill us,” Sen. Bates said.
Sales tax, however, is one of the biggest revenue sources in Rhode Island totaling nearly $900 million. Rep. Joy Hearn (D-Dist. 66, Riverside and Barrington) said she isn’t opposed to a conversation on eliminating the sales tax but said the potential loss of revenue is a crucial question.
“It’s a lot of money,” she said.
Rep. Malik said he understands the loss of revenue that accompanies the proposal but believes a heightened ability to compete with other states will spur economic activity in Rhode Island. Rep. Malik also said some answers could emerge as the bill moves through the legislative process.
The matter has been referred to the House Finance Committee.