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By phasing out the state's corporate income tax, lowering the state's personal income tax rates and making other such changes, Rhode Island could signal that it is a business-friendly state, a place to grow and expand business and create jobs, Carcieri said at the hearing.

Rhode Island's personal income tax system includes a top rate of 9.9 percent, one of the highest in the nation. And Rhode Island's 9-percent corporate income tax rate is scheduled to become the highest in New England next year.

Partly as a result, some small- and medium-sized businesses are leaving the state, Carcieri said. "The owners, the investors who create the jobs we so desperately need, they're the ones that we have been driving away and making it very difficult on with our tax policies," he said.

The hearing was held on tax aspects of Carcieri's proposed budget. He spoke for about 40 minutes, and there were indications during his presentation and afterward that his plans face a rough road ahead.

The state must resolve a deficit of $590 million for the year that starts July 1. And more deficits are forecast for future years, said state Rep. Steven M. Costantino (D-Providence), the committee's chairman.

In an interview, Costantino said he favors making Rhode Island more competitive from a tax standpoint with other states.

"But the challenge is, how do you do that in an environment where the state is losing significant revenues," while also considering major changes to government employee pensions, he said.

At the hearing, Rep. Thomas C. Slater (D-Providence) sought assurances from Carcieri that his proposals would result in job creation. "Have we any guarantee . . . that this will help raise jobs that help those that need it most, the poor?" Slater asked.

Carcieri responded, "There's no guarantees in life. You know that." But he said that the states that are currently seeing growth in population, jobs and revenue "are those that have created an environment for business to prosper, and they are the low-tax-burden, pro-business states."

The hearing, which lasted more than three hours, included testimony from more than a dozen people. Some favored Carcieri's plans, others did not.

John M. Rhodes, senior principal with Moran, Stahl & Boyer, which helps businesses decide where to locate, said the state's tax climate contributes to the perception that "Rhode Island is not interested in attracting new business. . . . Changing the tax policy will start to change the perception."

Alfred J. Verrecchia, chairman of Hasbro Inc. of Pawtucket, a global maker of toys and games, said in written testimony that the state must "dramatically change the perception of Rhode Island from 'tax hell' to 'business friendly'.''

Opponents said that the state cannot afford Carcieri's proposals, especially given Rhode Island's budget problems.

Karen Malcolm, executive director of Ocean State Action, a coalition of labor unions and advocacy groups, said that previous state tax cuts have not worked. "The policies we've been following have not brought the promised jobs," she said.

Instead of phasing out the corporate income tax, for example, Rhode Island should instead seek changes to local property taxes, which represent the single greatest tax burden for business, she said.

And to improve Rhode Island's overall business climate, the state should focus on other areas, such as fixing crumbling roads and bridges, she said.

Rick Harris, executive director of the Rhode Island chapter of the National Association of Social Workers, said that Carcieri's proposals would drain away tax revenue at a time when it is most needed for education, health care and other programs. "If you're taking more money out of the system, how are we going to meet this need?" he said.

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