Senate leaders frown on the House-approved flat tax, and are pitching a lower property-tax cap.

01:00 AM EDT on Friday, June 23, 2006

BY SCOTT MAYEROWITZ
Journal State House Bureau

PROVIDENCE --

With the General Assembly set today to head home for the year, it appears the Senate will finally vote on the state's $6.66-billion budget.

The budget has been held up as the House and Senate horse trade. The Senate wants the House to lower a cap on annual property-tax increases. The House wants a flat tax benefiting the state's top earners, which has been tacked onto the budget.

Both were posted for consideration, but their fates remain unclear.

The flat tax is aimed at making Rhode Island more competitive with Massachusetts. House leaders hope it will attract businesses and create jobs.

Several senators, however, did not take warmly to the proposal during a briefing yesterday.

"I think there are better ways to create jobs than cutting taxes for the wealthy," said Sen. James C. Sheehan, D-North Kingstown.

Sen. Harold M. Metts, D-Providence, said the cut is "going to be a hard seller for us" in the upcoming campaign season.

The 8-percent flat tax would benefit 516 Rhode Islander filers and 1,171 filers who live elsewhere but had Rhode Island income, according to Division of Taxation calculations on 2004 tax returns.

Those 516 Rhode Island residents or couples would save on average $10,972, according to the division. They represent one-tenth of a percent of all returns.

They are also the top earners: 467 had an adjusted gross income of $200,000 or more.

Within five years, the flat tax would drop to 5.5 percent, benefiting 7,416 Rhode Island filers and 5,703 out-of-state filers. Nearly 81 percent of those Rhode Island filers earn $200,000 a year or more.

The budget would also:

Increase the car-tax exemption from the first $5,000 in value to $6,000. The savings vary from community to community. Providence residents would save up to $76.78 per car, those in Lincoln, $30.66, Bristol, $17.35 and New Shoreham, $9.75.

Provide schools with 4.8 percent more aid. Governor Carcieri's budget had given some suburbs more money, but lawmakers chose the same increase for all communities, benefiting urban districts.

Give the Assembly power over leases. Lawmakers lost their seats on the state Properties Committees in separation of powers but now wrote themselves back into the process. Any lease for five years or more that exceeds $500,000 would require Assembly approval.

Create a new Department of Revenue, headed by a new director appointed by the governor. The department will contain the division of taxation, division of motor vehicles, the state lottery and a new office of revenue analysis and a new division of property valuation.

Ask voters to approve $50 million in construction subsidies for what the lawmakers hope will be more affordable housing.

Provide $1 million in tax credits for corporations that donate to scholarships for private and parochial schools.

Close state-subsidized health care to illegal immigrant children on Jan. 1. Anyone enrolled before continues to be covered.

Free private health insurers from covering infertility treatments, except for women between the ages of 25 and 40.

Formalize the executive office of health and human services, a post Carcieri has sought for years and had already created through executive order.

smayerow@projo.com / (401) 277-7513