PROVIDENCE, R.I. (AP) -- Gov. Lincoln Chafee's proposal to shrink business taxes to boost Rhode Island's competitiveness could be jeopardized by opposition from pharmacy giant CVS Caremark Corp., which opposed the governor's plan to pay for the tax cut during a legislative hearing Wednesday.
The independent governor's proposal would reduce the state's corporate income tax rate from 9 to 7 percent over three years, ultimately giving the state the lowest corporate tax rate in New England. The plan has the backing of the Greater Providence Chamber of Commerce and top lawmakers, who say reducing the tax would boost the state's business climate.
But Chafee's plan for offsetting the tax cut would reduce a tax credit program designed to spur job development. In the last fiscal year CVS received more than $15 million in credits under the program. While the company supports Chafee's call to reduce the corporate income tax, CVS lobbyist Robert Goldberg said cutting tax credits could prompt the Woonsocket-based company to re-evaluate its presence in Rhode Island.
"Any reduction made to the tax credits ... will result in a serious examination of both our current concentration of jobs here as well as an evaluation of any future job growth in the state," Goldberg told lawmakers reviewing Chafee's proposal.
CVS Caremark's opposition has lawmakers trying to figure out a way to pay for the tax cut without alienating one of the state's largest companies. Last year it ranked 18th on the Fortune 500 list.
"The corporate income tax (cut) is important to economic development," said Rep. Helio Melo, D-East Providence and chairman of the House Finance Committee, which reviewed Chafee's proposal. "You only have a certain pot of money, though, and the question is, where do you get the money to pay for it?"
Chafee said he's concerned about CVS' opposition to his plan, but said lowering taxes for thousands of companies could help the state's economy more than preserving a tax credit enjoyed by only a few businesses.
"Lowering the corporate income tax is in everyone's best interests, including CVS," he said.
Lawmakers have vowed to make improving the state's place in business rankings their top priority for the year. Chafee's proposed tax cut is one of the highest-profile efforts so far, and it's won the support of the Greater Providence Chamber of Commerce.
"It's an excellent move," said R. Kelly Sheridan, a lobbyist for the Greater Providence Chamber of Commerce. He said businesses use income tax rates to gauge a state's competitiveness. "The reality is, the corporate income tax rate is a benchmark. We need to begin to move the needle on all of these rankings, and we think this is an excellent start."