FY2012 Budget Sales Tax M odernization as Proposed by the Governor - - PDF document
FY2012 Budget Sales Tax M odernization as Proposed by the Governor Senate Fiscal Office April 14, 2011 www.rilin.state.ri.us/ SenateFinance Overview of Presentation FY 2012 Budget Context Overview of Proposal Three Components to Proposal
Senate Fiscal Office April 14, 2011
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Tax Rate Reduction Base Broadening New 1.0 Percent Sales Tax
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Ongoing Revenues, 59.4% One-time Revenues, 7.2% Shifts to Other Funds, 21.2% Expenditure M odifications, 12.2%
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Current sales tax rate is 7.0 percent of the retail price of certain goods, exempting nearly all services and sales on food, clothing and medications. FY2012 sales tax collections estimated at $824.0 million and represents 28.0 percent of total revenue collections ($2,938.0 million).
S ales tax collections peaked in FY2007 at $873.2 million S ales tax collections dropped to $803.4 million in FY2010
Governor’s Budget solution relies heavily on Sales Tax proposal to close deficit. Total sales tax collections would exceed projected income tax collections if enacted, becoming the largest single tax revenue source to the State.
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$745.9 $777.4 $822.9 $847.7 $869.2 $873.2 $845.4 $808.1 $803.4 $805.5 $824.0 $650 $700 $750 $800 $850 $900 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Millions
0.0% 2.0% 4.0% 6.0% 8.0%
Percent C hange S ales Tax Collections Change in Collections
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Reduces the sales tax rate from 7.0 percent to 6.0 percent; Expands the 6.0 percent tax base to certain additional goods and services; and Creates a new 1.0 percent tax rate applied to additional goods and services.
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FY2012 FY2013 FY2014 Sales Tax Rate at 6.0% ($117,714,286) ($120,734,637) ($121,584,056) Base Expansion at 6.0% 197,594,235 203,174,625 204,604,423 1.0% Tax on Certain Items 85,000,451 87,238,907 87,865,310 Total $164,880,400 $169,678,895 $170,885,677
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Rate reduction from 7.0 percent to 6.0 percent would begin July 1, 2011, resulting in $117.7 million less in revenue. Goods that would have a reduction in tax rate include, but are not limited to:
Input purchases by non-manufacturing; Automobiles including leasing and motorcycles; Tangible personal goods; Package store purchases; Telecommunications/ wireless equipment; Household appliances, electronic equipment, computers; Electricity, gas and water.
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6.00% 5.00% 6.00% 6.00% 0.00% 7.00% 6.35% 6.25% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% 8.00% CT (Current) CT (Proposed) ME MA NH RI (Current) RI (Proposed) VT
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Base expansion to tax at the 6.0 percent rate would result in an estimated $197.6 million in net new revenue. Goods currently exempt from tax:
Newspapers; Nonprescription drugs; Medical marijuana; Pre-written computer software delivered electronically; Insurance proceeds from destroyed passenger cars as trade in allowance.
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Domicile related services (i.e. landscaping extermination) Employment agency services; Personal care services; Investigation and security services; Business support services; M oving and storage services; Laundry and dry cleaning services; Pet services. Services/Goods currently not subject to tax include, but are not limited to:
Amusement parks and other recreation services; Membership clubs and professional associations; Live entertainment (excludes promoters of performances); Motor vehicle maintenance, including car washes; Clothing, electronics, appliances, watch and jewelry repair.
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New 1.0 percent sales tax rate for certain items, projected to generate $85.0 million in net new revenue. Assumes collections on a number
could be determined. Includes $1.8 million revenue loss for non-compliance with Streamlined Sales and Use Tax Agreement. Includes, but not limited to:
Purchases for manufacturing purposes and manufacturing equipment; Charitable, educational and religious organizations; Clothing and footwear; Home heating oil and water for residential use; Aircraft and aircraft parts; Boats brought in for storage, sale,
Equipment used for research and development.
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Provides $19.3 million to encourage fiscal best practices for municipalities. Requirements increase over time:
FY2012: Requires enhanced reporting from municipalities, such as 5-year forecasts FY2013: Must fund pension ARC over 5 years; additional requirement for systems less than 50.0 percent funded FY2014: Must fund OPEB ARC over 10 years; must join multiple employer trust if established
M AST and TAP tax illustration 7% 6% 1% 1% 1% State share MAST/ TAP Local share
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The local Hotel Tax rate would increase from 1.0 percent to 2.0 percent beginning July 1, 2011, generating $2.6 million in FY2012.
This increase is coupled with the decrease in the sales tax by 1.0 percent, resulting in no net tax increase for hotel accommodations. The additional 1.0 percent would be deposited into a new restricted receipt Tourism Asset Protection (TAP) Fund and dedicated to S tate-owned tourism assets.
M AST and TAP tax illustration 7% 6% 1% 1% 1% State share MAST/ TAP Local share
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Not withstanding the larger issue of whether changes in sales tax policy are warranted to resolve the budget deficit, the following questions should be considered as your review the proposal before you.
Fairness/Equity Competitiveness Administration Transparency Revenue Product Alternative Choices