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Oppose Tax Hikes on Digital Goods!
An Open Letter to the Rhode Island Legislature

April 13, 2011
By Andrew Moylan

Dear Legislator:

     On behalf of the National Taxpayers Union’s nearly 1,100 members in Rhode Island, I urge you to oppose attempts to raise taxes on digital goods and services. H.B. 5894 and S. 589, part of Governor Chafee’s proposed budget, contain a dramatic expansion of sales taxes to a wide variety of digital goods and services purchased over the Internet. This expansion would double-tax digital products and threaten to drive technology jobs and investment to nearby states whose burdens are significantly lower.

     The new levies contained in H.B. 5894 and S. 589 would be piled on top of the state’s existing gross receipts tax of five percent to which businesses are already subjected. Combined with local option sales taxes, they could hike burdens by as much as seven percent on a vibrant portion of the digital economy. Discriminatory double-taxation of any product is counterproductive, but when targeted at a vital and growing portion of our economy like digital goods it is all the more harmful.

     The last thing Rhode Islanders need is higher taxes. According to data from the non-partisan Tax Foundation, the state’s residents are saddled with the fifth-largest overall state and local tax burden in the nation. Rhode Island businesses looking to grow face the ninth-worst business tax climate in the country. Wireless services, which are among the most heavily-taxed of all consumer services, suffer from an average levy of nearly 20 percent thanks to federal, state, and local taxes and fees – enough to attain the dubious distinction of sixth-worst in the country.

     This is, quite simply, not a state that is under-taxed. The answer to today’s budget challenges lies not in the pursuit of painful tax hikes, but in trimming spending and restraining the growth of government. That path will lead Rhode Island back to a strong economy.

     We urge you to oppose the damaging tax hikes on digital goods and services contained in H.B. 5894 and S. 589. They will harm Rhode Island’s consumers, businesses, and its fragile economic recovery.



Andrew Moylan
Vice President of Government Affairs