House Minority leader Robert A. Watson told business leaders that Republicans are against tax increases.

The Providence Journal / Steve Szydlowski

PROVIDENCE — Stephen D. Alves, chairman of the Senate Finance Committee, suggested yesterday that lawmakers may raise business taxes to balance the state budget.

The remarks, at the Greater Providence Chamber of Commerce’s high-profile legislative luncheon, ran counter to what had appeared to be a growing consensus at the State House regarding personal and corporate income taxes.

“I think we have been fair to the business community,” Alves, D-West Warwick, said. “The pain should be shared equally.”

The state is facing a $150-million deficit this fiscal year and a projected $450-million deficit for the year that begins July 1. That challenge, Alves suggested, justifies new scrutiny of a range of tax incentives the legislature has approved for businesses, as well as a review of tax rates.

Of the 45,840 corporations registered in Rhode Island, 94 percent pay only $500 in annual corporate income taxes to the state, Alves said. He also questioned legislation that lowered taxes for the state’s wealthiest residents, arguing that tax cuts for lower- and middle-income residents are more likely to spur spending.

Some companies that have received tax breaks, Alves said, have employees enrolled in state health-care programs for the poor.

“We really have to think of the balance,” said Alves, who has served in the state Senate since 1991. “We need to make smarter decisions up there.”

That argument drew little applause inside a fifth-floor ballroom at the Rhode Island Convention Center yesterday, where 500 business leaders gathered for the annual luncheon.

Before introducing the panel of top lawmakers, the chamber’s chairman, Nortek Inc. vice president and treasurer Edward J. Cooney, warned against any “backslide” on tax reforms. The antidote to the budget crisis, he said, is better recruitment of companies that will create jobs and boost tax receipts.

Laurie White, the chamber president, also sought to discourage talk of higher taxes, cautioning lawmakers not to exacerbate an “exodus” of young entrepreneurs. “In this state,” she said, “we need more taxpayers, not more taxes.”

Most of the legislators on the chamber panel — representing both parties — seemed to take the cue.

“We are against tax increases,” House minority leader Robert A. Watson, R-East Greenwich, said. “Republicans have always stood with you on tax issues.”

House Speaker William J. Murphy, D-West Warwick, defended the historic-tax credit, targeted by Governor Carcieri for cutbacks.

Rep. Steven M. Costantino, chairman of the House Finance Committee, said any tax increases risk eroding the state’s “credibility” with businesses.

Senate Minority Leader Dennis L. Algiere, R-Westerly, went further, saying tax increases would undermine critical economic development. “We cannot afford to raise taxes in Rhode Island,” he said. “We’re trying to provide you with the tools to expand your businesses.”

In lieu of tax increases, most of the legislators yesterday promised business leaders that they would close the budget deficits by curbing state spending and promoting new businesses.

Costantino called for the growth of the state-owned port at the Quonset Business Park, in North Kingstown, and the lengthening of the main runway at T.F. Green Airport. “Ultimately, we need new job growth in the state,” he said. “How do we expect to grow jobs when we’re not willing to expand the seaport, when we’re not willing to expand the airport?”

In his remarks, Murphy pointed to a 19-member commission, that met yesterday for the first time, which is studying ways to reduce state spending on pensions.

Senate Majority Leader M. Teresa Paiva Weed, D-Newport, pledged to study consolidating school services, such as busing, student lunches and health insurance for teachers.

Paiva Weed also defended controversial limits on annual property tax increases. To help cities and towns cope, she said, the state plans to pay closer attention to spending by local school departments.

“The economy,” Paiva Weed said, “is number-one on everyone’s mind.”

bgedan@projo.com