Rhode Island's annual debate about taxes and spending begins Tuesday when Chafee unveils his budget priorities to the Assembly in his State of the State address. The governor has barnstormed the state highlighting the financial hurdles faced by the Rhode Island's 39 cities and towns. One way to deal with the river of red ink flooding our local budgets would be to go back to the future by changing some of the spending and taxing priorities of the last several years.

A walk down the path of recent history is relevant here. Over the past several years - and particularly at the end of Governor Donald Carcieri's administration - the Smith Hill gang has cut about $200 million in state general and education aid to the communities. The Assembly also allowed the cities and towns to recover some of this money by raising the clunker tax - car taxes on vehicles valued at $6,000 or less. These vehicles were previously exempt from taxes. State government also cut income taxes for the wealthiest Rhode Islanders, those earning more than $250,000 annually to bring our income levies in line with Massachusetts.

The results of these policies were predictable: Big increases in car and local real estate taxes, especially in the state's older cities. Now residents are crying for relief as rebellions on property and car tax rates take root across the state.

From a sheer political calculus, the attitude of state lawmakers and Carcieri was astute. Cutting taxes at the state level absolved lawmakers of the blame for state tax increases while burdening the town councils, mayors and school committees with the unpopular task of raising local taxes.

Now the state faces a $125 million deficit. Assembly leaders and Chafee vow they will slice spending before considering the last resort of state tax increases. Yet, without the restoration of some state money to the public schools and communities, property taxes are sure to jump for house and car owners.

Chafee's attempt last year to raise sales taxes was thwarted by an outcry from the business community. This year, lawmakers and the governor ought to look at the income tax, the fairest and most progressive of all state taxes, if Rhode Island needs more money. Our neighboring states have increased taxes in recent years. Massachusetts raised sales taxes and Connecticut has increased income taxes. Both states have lower unemployment rates and better job growth than Rhode Island.

There are already some ideas percolating at the State House, where State Sen. Harold Metts of Providence is seeking to open a debate on increasing taxes for the best-off among us.

One problem with further budget-cutting is that outside of education aid to communities, there isn't a whole lot to cut. Slashing education more will only heap more red ink on cities and towns. There is some talk at the State House about increasing the rooms and meals tax to fully finance the education financing formula.

Our tiny state won't return to prosperity without investments in schools, roads and public services. It is also about time to turn years of talk to action about regional links among communities in schools and public safety that could lead to more efficient delivery of those vital government services. Does a state as small as ours really need the plethora of school districts and fire departments that taxpayers currently support?

If we continue to starve our communities on the altar of refusing to raise state taxes, Rhode Island may as well change our highway signs. Instead of `Welcome to the Ocean State' we'll have to say `Welcome to the state of soaring property taxes and bankrupt communities.'

Do you have insight or expertise on this topic? Please email us, we'd like to hear from you. news@wrni.org.

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