Lawmakers debate sales tax holiday in RI to boost recession-stung retailers

A proposed sales-tax-free weekend designed to lure consumers back to struggling Rhode Island retailers appeared headed for an early demise Wednesday in the Statehouse, largely because of the state's budget crisis.

Rep. Deborah Ruggiero's bill would free shoppers from paying the state's 7 percent sales tax on purchases of $2,500 or less during the third weekend in August. Neighboring Massachusetts has previously held a sales-tax-free holiday the same month.

The freshman lawmaker pitched her legislation as a way to help bolster small businesses, particularly retailers, who dominate the economy in Rhode Island. Rhode Island's unemployment rate stood at 10.3 percent in January, the third-worst in the nation.

State retailers lost 3,600 jobs in the past year, a greater loss than any other sector except long-dwindling manufacturing. Consumer spending has dipped with the tanking economy.

"Right now, retail purchases aren't happening," Ruggiero said. "These businesses need our support."

Christopher Semonelli, owner of a Sears franchise in Middletown, told lawmakers on the House Finance Committee that when Massachusetts allows tax-free shopping, appliance sales are six times above normal for another Sears franchise in Fall River, Mass. Bay State lawmakers, who also face budget difficulties, have not decided whether to continue the practice this year.

Allowing the sales-tax holiday would cost Rhode Island almost $5 million in tax revenue, budget officials said. Gov. Don Carcieri and lawmakers are already trying to close a massive deficit equivalent to about 11 percent of expected state spending. To balance the books, they are debating reducing state funding for local government and employee pension plans.

Rep. Steven Costantino, chairman of the House Finance Committee, said it was a difficult year to consider taking a loss in sales tax revenue. His committee, which is responsible for shaping the state budget, did not vote on Ruggiero's proposal, effectively keeping it from getting a full vote on the House floor.

"I would hate to see my favorite programs go down the drain because we had a sales tax holiday," said Rep. Thomas Slater, a committee member worried about cuts to social welfare programs.

A similar bill is pending in the Senate.