Booze Confirms: Sales Tax Sauce for Art Is Sauce for Everything Else

In case you (especially my fellow tea-totallers) hadn’t heard: in 2013, Rhode Island removed the sales tax on wine and spirits.

Coincidentally, that was also the year, at the urging of then-Senate President Teresa Paiva-Weed, the state removed the sales tax on art; more specifically, “original and limited edition works of art sold in the State of Rhode Island” were made exempt from state sales tax.

Then-Speaker Gordon Fox & then-Senate President Paiva Weed made the case for this exemption in a July 12, 2013 op-ed published in the Providence Journal. Very interesting, in this op-ed, they cited the lifting of this sales tax as a way to promote economic development and job creation.

“Within this framework, new initiatives will be set in place to address many factors related to economic development and job creation in Rhode Island. This framework will be visionary and comprehensive, rather than reactive.

(We should stop for a moment to acknowledge those people who might point out here that art is really kind of a luxury and question why the sales tax on a luxury item was lifted but has remained on all kinds of essential items. To those people, I would say, you are absolutely correct party poopers. Let us not get distracted by your wise observation buzz-killing judgementalism but remain focused on the main point, which is the too-rare example of an accurate economic development insight by former Senate President Paiva Weed and former Speaker Fox.)

This positive correlation between economic development/job creation and eliminating the sales tax on art was also echoed in a related report by the RI Division of Taxation. And, of course, it is exactly what the Rhode Island Center for Freedom and Prosperity has been saying on a much broader basis for years with their sales tax elimination or reduction proposals.

But the Center went further than simply making a statement. They employed a complex economic model that showed a

21.2% positive statewide retail impact if the sales tax were to be cut to 3.0%.

We don’t have sales trends for art following the lifting of the state sales tax. (If you have them, please by all means send them along.) We do have it for the aforementioned wine and spirits. They confirm both the statement of the two former legislative leaders and the Center’s projection of a spike in retail sales that would follow a comprehensive reduction of the sales tax.

… in the years after the 7% retail sales tax on wine and spirits was repealed (to 0.0%) in 2013: … Wine and spirits sales saw a boost of 21.4% over the first two years

To reiterate: Rhode Island eliminated the sales tax on a product (wine and spirits) and retail sales went up significantly. Now imagine the impact – on retail sales, on businesses, on jobs and on the collection of other taxes – of doing that state-wide.

The Center this week released the latest JOI ranking (Jobs & Opportunity Index – a much more comprehensive way to quantify employment and non-employment) of Rhode Island this week. The state remains stuck at 48th.

Clearly, simply handing out gobs of taxpayer dollars to corporate cronies is not doing the trick.

A radically different approach is needed. The former speaker and senate president, along with the Center, correctly identified the mechanism; state data confirms the reality: ladle the art-and-booze sauce (???) all over Rhode Island.

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