PROVIDENCE – Two Woonsocket lawmakers — Rep. Robert Phillips and Sen. Marc Cote — want to offer a six-year tax break for businesses that come to or start up in Rhode Island and hire at least two people.
A new company, Phillips told The Call Thursday, would get a 50 percent reduction in its corporate tax for each of the first three years it is in business and a 25 percent reduction for the next three years.
To take advantage of the incentive, the company would have to apply for it with the state tax administrator within 30 days of hiring its second employee. The new employees may not be relatives of a controlling shareholder, officer or manager of the corporation. Businesses using the hiring of individuals to obtain any other tax break would be ineligible for this one, which is dubbed the Job Creation Incentive Act.
Phillips said he and Cote were “thinking of ways to give a shot in the arm to the state of Rhode Island and our community, the city of Woonsocket to get businesses to come back. All of a sudden it just popped up: why don’t we give incentives to new businesses just coming in?”
After considering options such as lowering the unemployment tax or the income tax of the new people hired, Phillips said, “we tossed around a lot of ideas and we pretty much settled that this is the easiest and best way to do it.”
Phillips has introduced his version of the bill in the House of Representatives, but Cote said Thursday there may be some fine-tuning to the language of the legislation before he submits the measure to the Senate, likely when it returns from recess the week after next.
Cote said that, conceptually, the bill he submits will be similar to the broad outlines of Phillips’s version, but he has not finished nailing down the particulars.
“The intent is to craft legislation that would send out, basically to the business community that Rhode Island is a place where you may want to open your new business because we’re going to give you some considerations for locating here. The main thing is job creation and if you are looking to start a new business, we are going to give you a phased-in, six year tax incentive to start your business in Rhode Island.
“At this point, I think it is a practical and solid initiative to encourage people to come here,” Cote said.
“The bottom line is, it doesn’t really affect state revenues because anybody taking advantage of this initiative is going to be creating new income for the state, so its investment driven and new money for the state. We just want to get the message out that, if you are in Connecticut or nearby Massachusetts and you are looking to start a new business, take a look at Rhode Island.”
The way Phillips puts it, “Right now, we are getting 100 percent of zero, so if we get 50 percent of three companies coming in and they are $100 million companies, we earn a lot more money than we are right now.
“This is the year for focusing on Rhode Island’s fiscal recovery,” Phillips said. “It’s important to remove hurdles for our local entrepreneurs so that they’re less afraid to take risks and open up shop or expand.”
Cote added: “It is clear from our national business rankings that people are skeptical of our ability to foster a proper environment for business growth right now. “We must take very thoughtful, deliberate steps toward undoing that mentality. The Senate has been working hard on plans to tackle impediments in our economy. I think this bill could help with that.”
Phillips said he consulted the House leadership on the bill, and “they said, ‘Put it in and we’ll see what happens.’ They didn’t give me a yea or nay so they are pretty much neutral on that.”