Paul Dion, the state’s chief revenue analyst, left, and David Sullivan, state tax administrator, speak during a tax-reform panel workshop at the Department of Administration last week.

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The Providence Journal / Mary Murphy

PROVIDENCE — A group formed by Governor Carcieri is poised to recommend a tax cut for some of the state’s highest-income taxpayers, a reduction in Rhode Island’s corporate income tax rate and a decrease in the state’s sales tax rate.

These and other proposals would, if adopted, result in a far-reaching overhaul of the way that Rhode Island taxes individuals as well as businesses.

The proposals are intended to improve Rhode Island’s competitiveness by bringing its tax system more in line with those of nearby states.

They are also intended to better position Rhode Island for economic growth and job creation, said the group’s leader, Gary S. Sasse, who is also director of the state’s Department of Revenue.

Rhode Island is not alone in reexamining its tax structure. Many other states, as well as the federal government, are rethinking their tax systems — amid changes in administrations, economic turbulence, and broad shifts in the way that consumers buy goods and services and the way companies do business.

Carcieri appointed the panel in May to recommend a long-term tax strategy “designed to make Rhode Island’s tax structure a competitive advantage in retaining jobs and recruiting businesses,” he said at the time.

“Unfortunately, I believe we are now at a competitive disadvantage with many of the other states in New England, including Massachusetts and Connecticut. That needs to change,” Carcieri said.

The group includes about 20 tax experts from government, business, accounting, law and other fields. It has been meeting for six months, focusing on the state’s taxation of individuals, businesses and property owners.

Sasse stressed yesterday that some of the proposals that emerged at the group’s meeting last week may change by the time it issues a report following its final meeting, set for Feb. 4 at the State House.

To date, the panel has reached a consensus on several issues, including these:

•A reduction in the state’s top personal income tax rate, to 5.5 percent from the current 9.9 percent.

(For 2008, the Massachusetts top rate was generally 5.3 percent; Connecticut’s was generally 5 percent.)

Panel member Kernan “Kerry” King, the governor’s executive counsel, said last week, “Right now, we’re perceived to be the worst tax state” in income tax in New England.

Lowering the top rate would help change that perception, said state Tax Administrator David M. Sullivan.

(Under the proposals, the new top rate of 5.5 percent would apply to Rhode Island taxable income of $150,000 and above. The current top rate of 9.9 percent generally applies to Rhode Island taxable income of above $357,700.)

•A drop in the state’s corporate income tax rate, to 8 percent from the current 9 percent.

Rhode Island’s corporate income tax rate is second-highest in New England, and will become the highest next year if left unchanged, according to the panel’s findings.

(Connecticut’s rate is 7.5 percent; the Massachusetts rate is 9.5 percent, but is to fall to 8.75 percent next year.)

The proposal would also eliminate most business tax credits, thus making the state’s business tax system easier to understand and administer, the panel found.

•A decrease in the statewide sales tax rate, to 5 percent from the current 7 percent.

(For 2008, the Massachusetts sales tax rate was generally 5 percent; Connecticut’s was generally 6 percent.)

Although the current Rhode Island rate is among the highest in the nation, fewer items are subject to the tax than in many other states.

Thus, the proposal would lower the tax rate but broaden the base of items to which that tax applies, said Paul L. Dion, chief of the state Department of Revenue’s Office of Revenue Analysis. “If the base is to be broadened, the rate would come down,” he said.

Under the preliminary proposal, Rhode Island would levy a sales tax on such items as nonprescription drugs, car repairs, newspapers, pets and pet services, haircuts, dry cleaning and tax preparation services.

THE CHANGES, as a whole, would be largely revenue neutral. In other words, taken together, they generally would neither increase, nor decrease the overall amount of revenue that the state takes in through the taxes it levies now, Sasse said.

Still, some people would pay more and others less if the proposals were adopted as planned. “There would be winners and losers,” Dion said.

For example, under proposals involving the personal income tax, lower-income and many higher-income taxpayers would generally pay less, but middle-income taxpayers — and the state’s highest-income taxpayers — would generally pay more.

This is partly because the proposals would eliminate most tax credits; end the favorable tax treatment of profit on the sale of stock and other such assets; and prohibit a taxpayer from deducting, for state tax purposes, such items as charitable contributions, mortgage interest and local property taxes.

However, within each category, some would fare better, others worse, depending on their circumstances, Sasse emphasized. “The commission is very sensitive to proposing any kind of change that would have an adverse impact on the middle class,” he said.

Panel member Mark Higgins, dean of the University of Rhode Island’s College of Business Administration, said that although some of the panel’s work will be fine-tuned, “On many of the issues, there’s consensus.”

Panelist Edward J. Cooney, vice president and treasurer of Nortek Inc., of Providence, a maker of building products, said it is likely that many of the panel’s proposals will be adopted.

Many government leaders agree that the state’s tax structure should be simplified and made more appealing to individuals and to businesses in Rhode Island and elsewhere that seek to expand here, Cooney said.

Firms announce massive layoffs

 It was another bad day for American workers, with companies across a broad range of businesses announcing thousands of layoffs.

 The scope of this latest round of layoffs shows that no segment of the economy is immune from the current slowdown.

 Among the companies announcing job cuts yesterday were:

•Caterpillar, the world’s largest maker of construction and mining machinery: 20,000

•Sprint Nextel, the third-largest wireless provider: 7,000

•The Home Depot: 7,000

•Texas Instruments: 3,400

 An additional 8,000 jobs are expected to be eliminated by the merger of pharmaceutical makers Pfizer and Wyeth.

Details, D1

ndowning@projo.com