Governor Gina Raimondo’s proposed budget would cut funding to the poor, fully fund the state education aid formula and create new taxes on high-end second homes and rental properties. You can read her full address to the House and Senate here.
Most significantly, Raimondo seeks to cut about $91 million from Medicaid, socialized health programs for poor people, and has already appointed a high profile task force to “reinvent” the program. It costs $2.3 billion a year, but about half of that is paid for through the federal government. Raimondo has already identified about $45 million in cuts and her budget executive summary says the task force is expected to find another $46 million.
But the poor aren’t the only ones who will pay to balance the budget. So will the state’s beach culture, as she’s proposing a new tax on million dollar second homes and AirBnB-style rentals.
The proposal calls for what has quickly been dubbed the “Taylor Swift tax”- a property tax levied on second homes worth more than $1 million. It will raise $11.8 million in new revenue, according to this briefing.
She’s also proposing an “AirBnB tax” that would raise $7.1 million in new revenue. From the executive summary: “The budget also closes an existing loophole that exempts vacation houses and small bed and breakfasts from paying the sales and lodging taxes. Finally, the budget would apply sales and local lodging taxes to unlicensed rentals, which have increasingly become an alternative to hotels, bed and breakfasts and other licensed lodging.”
Both these taxes will disproportionately affect the touristy areas of Rhode Island – the islands and South County. But Senate President Teresa Paiva Weed, of Newport, where untaxed vacation rentals and million dollar second homes are commonplace, didn’t seem to mind.
“I think it’s a bold and brave look across the spectrum,” Paiva Weed said. “Just as she is asking for $90 million in Medicaid savings she is also reaching out to our wealthiest citizens to also assist us in moving forward.”
Even House Speaker Nick Mattiello, who never met a tax he didn’t want to cut, gave some early – though conditional – support to the Taylor Swift tax. “It’s an interesting initiative,” he said. “It seems like something I’d be inclined to support but right now I want to look at the details of it.”
As did her predecessor, she is fully funding the state education aid formula – for an overall increase of $34 million from the previous year.
Raimondo also called for statewide all-day kindergarten, and an end to the school construction moratorium. Through refinancing debt, she proposes a $20 million “to create a capital fund to help address school facility needs.”
According to the executive summary, “Lifting the moratorium and setting the annual construction aid appropriation at $80.0 million starting in FY 2017 will create fiscal stability with predictable funding and allows for projects to be prioritized.”
Raimondo would like to see the Earned Income Tax Credit increased from 10 to 15 percent in one or two years, depending on the early summer revenue predictions. Massachusetts Earned Income Tax Credit is 15 percent and Connecticut’s is 27.5 percent.
Her proposed budget would raise an additional $7.1 million by increase by 25 cents the tax on a pack of cigarettes.
To promote construction, Raimondo proposes, “a package of real estate tax incentives will encourage construction of job-producing projects, with a focus on development near transit hubs and historic structures. The package includes Rebuild Rhode Island tax credits, tax increment financing, and partial assistance for local tax stabilization agreements that will make investing in construction and development in Rhode Island a compelling proposition,” according to the executive summary.
She’s also proposing what she calls the Anchor Tax Credit. “This tax credit incentivizes our largest employers —the anchors of our economy — to attract their suppliers and affiliates to Rhode Island. These employers will benefit from proximity to their suppliers, while the state gains new jobs and develops industry clusters,” said the executive summary.