Governor Lincoln Chafee’s proposed tax increases have gotten backlash from various groups, and now the Rhode Island Association of Realtors (RIAR) is taking its turn on the soapbox.
RIAR plans to gather next Wednesday at the State House to combat the proposed 13 percent rental tax that would, if passed, take effect on July 1.
The tax would apply to short-term rentals, and would affect homeowners who receive income from their rental property for more than 15 days a year. The tax would be applied for the first 30 days of the renter’s stay.
“It affects a lot of different people like the military and college students,” said Susan Arnold, CEO of RIAR. “It affects all of tourism, and a lot of people who can’t sell their house might think of renting their home instead.”
Arnold said Rhode Island is already at a disadvantage because of the state’s high property taxes, and adding an additional rental tax would drive people out of state, especially during the summer months.
“Massachusetts did a study on the rental tax and rejected it,” she said. Neither Massachusetts nor Connecticut has a rental tax, and Arnold believes people will head to neighboring states to evade the tax.
Arthur Yatsko of Salisbusy Agency agreed, saying that people will take what money they would have spent on the 13 percent tax in Rhode Island and use it on plane tickets and extra gallons of fuel.
“Tourism is the second largest industry in the state,” he said. “We’re going to drive tourists to go to the Cape instead of stay in Rhode Island.”
Yatsko said even if people do continue to vacation in Rhode Island, they will spend less on other activities like dining.
“If you budget $5,000 for your vacation, and the tax eats up $300, that’s $300 less you’re going to spend elsewhere,” he said. “We’re robbing Peter to pay Paul.”
In addition to driving business out of state, Arnold said it would affect permanent residents, too.
“It would be that much less money for the homeowner,” she said. “It’s supposed to generate $1.9 million, but I don’t know how. And we never really see where that money goes.”
Yatsko called the $1.9 million figure “overstated,” insisting that people won’t spend as much money as they would without the tax.
“People don’t go on vacations with unlimited funds,” he said.
Arnold said the Realtor Association’s CPA, David Lucier, has crunched some numbers, and believes the administrative costs of the tax will exceed the $1.9 million projected revenue.
RIAR plans to assemble a group at the State House on March 7 at 12:30 in room 35, where the House Finance Committee will hear the bill.
Yatsko will be attending for both short- and long-term reasons.
“In the short-term, I want them to not pass this bill,” he said. “And in the long-term, I want them to give a little more thought to these proposals so I don’t have to take time out of my work to ask, ‘What were you thinking?’”
Although the Realtors Association has been invited, Arnold is hoping the general public will come and make their voices heard as well.
“We would love to have hundreds of people [at the State House] come and make a show of strength,” she said. “This is a Main Street issue. It affects constituents more than I think they realize. It doesn’t affect people from out of state with loads of money; it affects the average Jane and John Doe.”
The Realtors hope their presence at the hearing will prevent the passage of what they believe is an excessive tax.
“This is death by 1,000 cuts,” she said. “People are struggling because their taxes haven’t gone down even though values haven’t gone up.”
Yatsko said there are other alternatives to the 13 percent tax, like watching expenditures.
“[The state] needs to spend money wisely,” he said. “Not on gates that cars don’t fit through at the State House.”
Yatsko said if money were spent more wisely, the state wouldn’t be in such dire financial straits.
“The days when the state had plenty of money are over,” he said. “We don’t have the luxury of trying something two or three times before we get it right.”