PROVIDENCE — Gov. Dan McKee on Tuesday defended his plans to tax some forgiven federal business loans and said he’d probably support changes to how police are disciplined in the state.
McKee, joined by Lt. Gov. Sabina Matos, convened a news conference dedicated to all things unrelated to COVID-19, which has dominated the state’s attention for more than a year. McKee’s aides say they hope to make it a regular event, in addition to the COVID-19 news conferences.
“The world is turning. It’s not all about COVID,” McKee told reporters inside a Department of Administration conference room in Providence. “The things we do right now in the state are going to impact us for years to come.”
Matos’ presence at the news conference was notable in its own right. McKee served as lieutenant governor under his predecessor, Gina Raimondo, but the two Democrats were not close working partners. In Rhode Island, the governor and lieutenant governor run and are elected separately, but when McKee took over in March after Raimondo became U.S. Commerce Secretary, he was able to hand-pick Matos, who was then the president of the Providence City Council.
McKee said it was the first time a governor and lieutenant governor have been in the same place “talking about the things that matter to people who live in the state of Rhode Island.”
At the roughly 45-minute news conference, McKee and Matos answered a range of questions, although the governor largely avoided taking firm stances on the questions posed by the Rhode Island press corps.
On taxes, McKee said he believed the proposals he’d outlined in his budget were fair. Paycheck Protect Program loans, also called PPP, were critical lifelines for businesses through the hard lockdowns of last spring and the halting, still-incomplete return to normal in the months that followed. Those federal loans can be forgiven if they’re spent the right way and businesses keep paying their workers.
The U.S. government has said those loans aren’t taxable on the federal level, and is also allowing companies to deduct from their taxes expenses paid with them. If Rhode Island followed suit, that would blow a $133 million hole in the state’s revenue projections, McKee’s administration said. So he’s proposing in his budget to make loan amounts above $150,000 taxable, which his administration projects would raise more than $60 million in revenue.
McKee pointed out that the smallest businesses wouldn’t have to worry at all if their forgiven loans were below $150,000, nor would businesses have to pay if their losses in a given tax year wiped out any taxable amounts.
“Each and every one of those PPP loans is receiving some level of tax relief,” McKee said in his first extended comments on the proposal, which have generated a backlash in the business community.
According to the state’s projections, fewer than 1 percent of for-profit businesses with forgiven PPP loans would be affected by the change in the 2020 tax year, and fewer than 15 percent of such for-profit businesses would be affected in the 2021 tax year. Because they’d be taxable once they’re forgiven, rather than once they’re issued, the burden would fall heaviest on the 2021 tax year, according to experts who have analyzed the plan.
If the proposal passed in the budget, Rhode Island would be one of only a dozen or so states to tax forgiven PPP loans, analysts say. (States are scrambling to change laws so the precise picture nationally isn’t perfectly clear.)
Rhode Island is also planning to tax all unemployment compensation in Rhode Island, even though the federal government, and many states, are excluding the first $10,200 for people below a certain income. Proposals are working through the General Assembly as tax time nears to match the federal rules on unemployment, and McKee said he supports them, with a big but: the proposal would cost some $30 million. Though the state is getting major federal support this year, it’s still unclear exactly how it can use it, McKee said. To exclude PPP loans and unemployment from taxation would mean hard choices elsewhere, McKee said.
“We don’t print money,” McKee said. “Washington prints money.”
And on policing, McKee said he would be open to changes in the Law Enforcement Officers’ Bill of Rights, a state law that critics say shields bad cops from the consequences of their misconduct. That law “probably” needs changes to make sure police who abuse their authority are held accountable, McKee said, though he also did not mention any specific way in which he’d change it.
“I don’t see a problem with improving police work by creating a better accountability system,” McKee said.
Matos, for her part, said she’d focus in her tenure on small businesses and housing. She’s convening a statewide group on housing, and continuing small-business town halls. She’s also staffing up and preparing to visit all 39 cities and towns.
“We’re ready to build back better,” she said.
Of course, although the news conference was dedicated to non-COVID issues, COVID came up. McKee said he believed supply of COVID-19 vaccines was roughly equal to demand for those vaccines right now. He said the state needed to get more aggressive about reaching out to people, comparing it to sales: When the phone stops ringing, you have to start dialing. And he said people should prepare for a further relaxation of business restrictions by around Mother’s Day.