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Law360 (Mar 11, 2021, 8:18 p.m. EST) – Rhode Island would legalize and tax recreational cannabis, increase taxes on hospitals and some real estate transfers, and provide partial pandemic-related federal business loans under an EU proposed budget of US $ 11.2 billion Dollars tax governor Thursday.
Democratic Governor Daniel McKee, who took over from former Democratic Governor Gina Raimondo this week, offered a budget designed to meet the needs of the novel coronavirus pandemic. However, it could change based on how much money Rhode Island is getting from the $ 1.9 trillion federal incentive bill signed by President Joe Biden Thursday. Raimondo resigned last week beeing confirmed as trade secretary in Biden’s administration.
“The pandemic has also exacerbated many inequalities and inequalities prior to COVID-19. Our budget is to address these and other issues that will persist after the threat from this virus subsides,” McKee said, referring to those posed by the virus.
McKee said in a letter that one of his top priorities would be to use federal stimulus funds to fully comply with federal paycheck protection program loan tax breaks. Under Thursday’s proposal, Rhode Island would partially decouple itself from the federal tax treatment of PPP loans, with the state taxing loan amounts in excess of $ 150,000. Other states like Maine, wrestle too with the cost of full PPP loan compliance.
Joseph Codega, assistant budget officer for the State Office of Management and Budget, said during a budget briefing that if fully adhered to the PPP loan treatment, Rhode Island would lose $ 133 million in two fiscal years. Partial compliance would allow Rhode Island to offset $ 67.7 million of those losses, he said.
McKee also suggested legalizing and taxing recreational cannabis at a combined tax rate of around 20%, a pitch coming days after the Senate chairs unveiled their own cannabis law. Rhode Island would impose a weight-based excise tax on cannabis cultivation expected to be around 3%, an additional retail excise tax of 10%, and the state sales and use tax of 7% on cannabis transactions. The program would allow the introduction of 25 licenses per year for the first three years.
McKee’s cannabis program is set to begin in April 2022 and is expected to raise $ 1.7 million in fiscal 2022, but will rise to $ 17 million thereafter, according to a budget presentation. The Senate’s proposal would tax cannabis at the 7% sales and use tax rate, add a special excise tax of 10%, but allow a local sales tax of up to 3%. Last year Raimondo suggested legalizing adult cannabis But the state controls sales and profits through contractors.
Rhode Island real estate tax would be amended under the McKee budget to tax property transfers at $ 2.30 for every $ 500 consideration for an amount greater than $ 700,000 in value. Codega said the proposal was similar to a proposal made by Raimondo last year that suggested creating a 0.92% bracket, except that Raimondo’s proposal started at $ 500,000. For values below $ 700,000, the current rate of 0.46% would continue to apply. Raimondo’s proposal was declined by the legislature last year.
McKee made a similar proposal to Raimondo, urging that the state license fee for hospitals be increased from 5% to 6% of net patient services revenue, by $ 32.3 million in fiscal 2021 and $ 178.2 million in fiscal 2022 . USD to raise. also, was declined by the legislature last year.
James Thorsen, acting director of the Rhode Island Department of Administration, noted that McKee was “very reluctant” to think carefully about increasing income taxes for high earners, particularly because of federal incentives.
Jonathan Womer, director of the state-run OMB, noted that the administration had been considering such a move for months.
“We didn’t think there was a need to increase it,” said Womer.
Sue Stenhouse, a Republican House spokeswoman, said GOP lawmakers were involved in committee hearings and could not respond immediately to comments.
Ryan W. Pearson, chairman of the Senate Finance Committee, D-Cumberland, told Law360 that, at first glance, the budget proposal presented a “strong foundation for building”. He noted that more details from the federal stimulus package passed on Thursday will be revealed soon and will affect government revenue projections.
“Once these details become clear, we will work to balance our operating budget and develop a long-term plan for this one-time infusion of federal dollars,” said Pearson.
House Speaker K. Joseph Shekarchi, D-Warwick noted that McKee had little time to fully prepare for his initial budget, but said he had established a good working relationship with him. He also noted the effect of the federal stimulus package.
“I am always aware that these one-off funds will not be available to cover the running costs of new or expanded programs, and we must be careful to come out of this crisis stronger than before,” said Shekarchi.
– Additional reporting from Asha Glover and Abraham Gross. Adaptation by Neil Cohen.
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