WARWICK, R.I. — The leading candidates for governor on Thursday carved out sharply different stances on taxes during a Greater Providence Chamber of Commerce event, which marked the last gubernatorial candidate forum before the Sept. 13 primaries.
Chamber president Laurie White cited rankings such as a CNBC report that places Rhode Island 45th on a list of “America’s Top States for Business.” And she asked the five Democratic candidates and one Republican candidate whether they agree with the chamber’s opposition to tax increases and its support for a tax system “that promotes private sector growth and makes Rhode Island more competitive.”
Former secretary of state Matt Brown, a progressive Democrat who co-founded the Rhode Island Political Cooperative, said he’s “not close” to sharing the chamber’s position on taxes.
“Fifteen years ago, the people running things here bought into what I think turned out to be a failed economic theory – trickle-down economics – and gave massive, massive tax cuts to just the richest 1 percent,” Brown said. “That has cost the state $1 billion over 15 years.”
He noted that in 2019 Johns Hopkins University issued a scathing report that set the stage for the state takeover of Providence schools. “That money could have gone to our school buildings, could have gone to teaching our kids,” he said. “We failed our kids.”
Brown said he would raise the top marginal income tax rate on the richest 1 percent from 5.99 percent to 10.99 percent. He also criticized proposals that aim to “build the economy by taking public money and giving it to large corporations” such as Amazon, which received a 20-year tax deal to build a 3.8-million-square-foot robotics sortable fulfillment center in Johnston.
Republican candidate Ashley Kalus, a healthcare executive, said her views align with chamber’s position on tax policy.
“We need to be more competitive, which means we need to reduce the tax burden,” Kalus said. She talked about the challenges business owners face when starting up a laboratory, buying new equipment, and paying property taxes on top of sales taxes. “It crushes entrepreneurship,” she said.
Kalus said the sales tax is regressive and she supports lowering the state’s sales tax rate, which is now 7 percent. “You can restructure the tax system in a way that is fair to everyone and also helps small businesses as well,” she said.
Dr. Luis Daniel Muñoz, a Democratic candidate, said he, too, supports raising taxes on the richest 1 percent. He said he would support increasing the top marginal income tax rate from 5.99 percent to 8.99 percent to produce an estimated $128 million to $144 million in annual state revenue.
Muñoz said the federal government gave massive tax cuts to the richest corporations, and now highly paid CEOs are blaming inflation on increases in the minimum wage. He called for providing incentives for cities and towns to create tangible property tax exemptions, saying the tangible property tax is “the most regressive tax we have” and it disproportionately affects “micro-businesses.”
Muñoz questioned whether the concern over taxes stems from the “indifference and mismanagement” by politicians from both parties, noting that former Republican Governor Donald L. Carcieri backed a $75 million state loan guarantee for 38 Studios, Curt Schilling’s ill-fated video game venture.
Secretary of State Nellie M. Gorbea, a Democrat, noted that in June she proposed raising the state’s 7 percent corporate income-tax rate to match the 8 percent rate in Massachusetts to generate $39 million a year in state revenue. She said her proposal would not affect 90 percent of Rhode Island businesses and would apply, for the most part, to the largest corporations.
Gorbea said she made the proposal because Rhode Island entered the pandemic with a structural budget deficit. While the state has a surplus now, that money should be used for one-time investments, not to plug budget holes, she said. “I know that we have some tough times ahead.”
Gorbea said she would use the new tax revenue to address major issues such as education, child care, and investing in small businesses. “If you are doing better, a 1 percent increase in corporate tax should be fine because we are using it to increase our school reconstruction program, to really change the quality of life we have here, to make housing affordable,” she said.
Former CVS executive Helena B. Foulkes, a Democrat, said she “very much” aligns with the chamber’s position on taxes.
“This is an important distinction between me and Secretary Gorbea,” she said. “I think that it is really important – especially as we are heading into a recession and coming out of period where we had a $2 billion surplus effectively between ARPA dollars and our surplus – now is not the time to be proposing that we raise taxes.”
While Gorbea says the tax hike would apply mostly to large corporations, Foulkes said it would apply to domestic profit corporations, including iconic Rhode Island businesses such as Del’s, Iggy’s, and Twin Oaks restaurant.
Foulkes also pointed out that Rhode Island was one of the few state to tax Paycheck Protection Program loans last year. “This was under the governor’s watch,” she said. “These loans were taken to make sure we kept people employed, and suddenly there was a surprise that happened. All of these things send signals.”
Governor Daniel J. McKee, a Democrat who took office last year and is seeking a four-year term, said he would not increase taxes. He he noted that he proposed budget that lowered certain taxes, including $75 million in tax reductions from eliminating the car tax a year earlier than scheduled.
“That’s not just the car in your driveway or the car in your garage,” he said. “That is all our vehicles in our businesses. Businesses are saving thousands of dollars right now. It’s a major competitive advantage.”
McKee reiterated that he wants to lower the state’s 7 percent sales tax rate. He floated that idea earlier this year, but the General Assembly did not include it in its final budget. “We are going to lower our sales tax,” he said. ”I will put in a proposal that will lower our sales tax in (next) year’s budget.”
“Leveling the playing field between us and Massachusetts and Connecticut on tax structure is really important,” McKee said.
Also, he noted that Rhode Island has rarely met the requirement to provide 10 percent of state contracts to minority-owned businesses. But he said that under his administration, the state is providing 16 percent of contracts to minority-owned businesses.
The forum took place at the Crowne Plaza Providence-Warwick hotel.
Edward Fitzpatrick can be reached at edward.fitzpatrick@globe.com. Follow him @FitzProv.