Governor Carcieri yesterday set up a Tax Policy Workgroup to create a long-term strategic state tax plan. The work group, chaired by Department of Revenue Director Gary Sasse, will develop proposals for tax-policy reform that meet the tests of equity, efficiency, predictability, competitiveness and transparency.

The work group includes 21 members, including accountants and lawyers who specialize in tax matters, economists and business and labor leaders.

Carcieri said, “Rhode Island cannot prosper if its tax policies hinder the creation of jobs and are a disincentive to investment. Unfortunately, I believe we are now at a competitive disadvantage with many of the other states in New England, including Massachusetts and Connecticut.”

The work group will first review taxation on business, including the cost and benefits of tax credits, combined reporting and alternative ways to tax businesses. Second, state taxes paid by individuals will be considered, including personal income taxes, the estate tax and consumption taxes. This discussion will include income-tax credits, the relationship between tax credits and the flat-rate personal income tax and the feasibility of shifting from income-based to consumption taxes. The third area of inquiry will deal with property-tax capacity, including the impact on personal and statutory exemptions, as well as how tax classifications affect economic competitiveness in Rhode Island cities and towns.

The recommendations of the panel are due in December and are expected to include a comparison with the tax structures of Massachusetts and Connecticut.