• Nesi’s Nightcap

In a statement issued early this evening, House Speaker Gordon Fox declared Governor Chafee’s sales tax proposal “unacceptable,” and described taxing some of the proposed items at 1% – including home heating oil, water and manufacturing supplies – as “particularly offensive.”

“After speaking with House members, we will not support the current proposal,” Fox said.

That sounds pretty clear. But Fox’s statement may be more nuanced than it appears at first glance.

In combination, Chafee’s sales tax changes were forecast to bring in $165 million in the fiscal year that starts July 1 – half the money needed to plug Rhode Island’s $331 million shortfall. So dropping it entirely would blow a huge hole in next year’s proposed budget.

If you read Fox’s statement closely, though, he doesn’t rule out raising more revenue from the sales tax – he rules out “Chafee’s proposed multi-tiered sales tax approach,” and he only singles out the idea of a 1% surtax for special condemnation.

So it looks like the 1% tax – which Chafee announced on the first day of his candidacy – is dead. But Fox’s statement doesn’t say anything about whether he could support broadening the number of goods and services taxed at 7% (or at 6%, if Chafee’s proposal to lower the rate passes). And the revenue that would be brought in by taxing more items at 6% far outweighs the amount generated by the 1% tax.

“The House will not pass the budget in its current form,” Fox said. “We will instead develop alternatives to this proposal and will continue to work with the governor to amend his budget submission.”

I don’t know what’s going to happen next – all I know is, somehow or other, the General Assembly is all but certain to find a way to eliminate the $331 million deficit and pass a balanced budget for 2011-12.

Update: Chafee responded with a terse statement of his own issued just before 8 p.m.: “I look forward to working with Chairman Melo and Speaker Fox to advance an honest, responsible budget that fixes our chronic structural deficits and puts Rhode Island on a path to prosperity.”