Now is the time for the press to check out why we have exemptions in the sales tax

Governor Chafee has proposed a "tax increase" in the way the sales tax is applied to attack the growing budget crisis facing Rhode Island and its 39 cities and towns. This has, as we might expect, drawn out all of the special interests in the State, as well as many of their Zoombies. These special interests are attacking the plan in order to defend their own special tax status and privileges they enjoy under the status quo. Of course that privilege, their exemption, is part of the problem. But they and the press won't admit it. It allows them to NOT pay for their fair share of the cost of government overhead services that they now enjoy for free.

A Typical Example??


In a lead article of the Providence Journal, "Chafee's proposed tax hikes add up for this Cranston family"  for example, we are given a list of added costs that a "typical" (whatever that means) middle class family these tax might mean. It assumes that they family did not have, and will not make choices about how they spend their money after the tax become applicable.

For example: Newspaper Subscriptions  $312  taxes $18.72.  The costs of the papers have been going up while the quality has been going down for quite some time. The outlets for public information have expanded significantly since the days when the newspaper was the only source of public information. So why do we still have an exemption for them today?

The imbalance of reporting in all media or "Why are newspapers excluded from the sales tax today anyway"

The article does not explain why these items were excluded in the first place. If we were to research each of these we might find that special interests lobbied the General Assembly at one time or another to get this special privilege. Once these privileges became law, everyone assumed it was a RIGHT. Nobody is going to question the right and the conditions that may have made it reasonable at the time it was passed into law.

 Those hidden exemption are subsidies

The general public is paying a hidden exemption to the sellers of those products and services  and to the buyers of those products and services .

The sales tax is called regressive by Liberals because it taxes the poor on the goods they buy while excluding the wealth for the services they buy. It is also made even more regressive by the special exemptions which, while intended to relieve some of the pain on the poor actually provide a higher dollar value relief to the wealth who purchase higher priced good in the same class. Take food for example:

A sales tax on a pound of bologna for example on sale for $1.50/lb would yield at a 2% sales tax an addition cost of $.03 cents for a pound that a poorer family might buy, while a pound of roast beef on sale at $5.00/lb would yield $.10 pound that a wealthier family might buy.   

The sales tax is called unfair by those small business sellers who have to charge a sales tax on the products and services they sell and by the buyers who buy those products. It imposes an administrative burden on the seller and gives an unfair advantage to their larger competitors who can spread the overhead cost over their  pricing of  larger volume and breath of their products. It also encourages those who can afford to drive to shop out of state for goods that are taxed at lower rate. This is seen every summer in the business from RI that goes to Massachusetts during Massachusetts' tax holiday sales.

Leveling the Playing Field

If all goods and services are taxed at a rate arrived at fairly AND removes the waste in the current tax system, then the tax payers would be better served.

First, because the tax cheats would be prosecuted or sued for their waste to the system ( lost revenue from the under the table deals), and  the tax avoiders would have a more difficult time finding true advantages in going out of state for minimal savings (price competition).

Second, removing the incentive to seek special exemption would  remove it as a political strategy (anti-competitive business practices) and the politicians in the General Assemble would have to publicly explain and justify why they are seeking such legislation and supporting such exemption (waste of public corruption).

Third, and Most important, is that spreading the total state debt and tax burden over the whole retail economy should result in a higher dollar return to the government for its services (distributing of government costs more fairly) and a lower competitive tax position for the state's tax payers relative to the two major competitors, Massachusetts and Connecticut (improving RI's competitive position in the region).

The Yes/BUT Media favors the Status-quo

While the newspapers are supposed to be balanced in their reporting, we can see in the discussion in the editorial pages and in the stories on the front pages that they are not. The full story is not being total, nor analyzed. Since the local TV media basically follows the newspaper story lines "how it is all unfair". This  makes the story line more believable to the public, even though its is incomplete and biased. Meanwhile, the other story line that the alleged cause for crisis blames the public worker and teacher unions and puts forth attacking these special interests is the solution to the problem.

Highlighting the Problem Does work


Don't get me wrong, the public workers and teachers union deserve the heat they are getting. They are being unfair to defend contracts that are unsustainable and unrealistic in the 21st century global economy. They are .being unfair to their members and the public who support them. Today's Projo also carried this story
 Providence union agrees to concessions. This shows that some  union leaders are beginning to see their responsibilities for the problem and are willing to take responsibility to become part of the solution.

But they are only one part of the special interests in the the General Assembly. The politician in the General Assemble are catering to many others as well. The Press should be looking at these special interests as well
 The press should  look into these special interests today as well as into the broader context of public tax policy.

As it is the Press is cutting the amount of hard news, rather than promoting their Yes/BUT PR propaganda.on limited space of the editorial pages and in the news sections. Instead, lets see some hard news about how these special interest tax exemption can about and why they should be continued.

The Yes/BUT have begun to raise their heads from their little tax shelters warrens. Now is the time for the press to check out these tax rabbit warrens and see what they are hiding in there.