Rhode Island’s $14.3 Billion State Budget Unveiled with Tax Changes

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An overview of the new Rhode Island state budget proposal for FY 2025-26.

News Summary

Rhode Island lawmakers have proposed a $14.3 billion budget for the fiscal year 2025-26, which includes various tax and fee increases aimed at funding health care and education, while avoiding income tax hikes for high earners. Key provisions include a rise in the gasoline tax, a new property tax on expensive homes, and increased fines for traffic violations. Legislative approval is underway, and the budget addresses a significant budget deficit while focusing on essential funding priorities.

Rhode Island Unveils $14.3 Billion State Budget with Tax Increases

Rhode Island lawmakers have proposed a $14.3 billion state budget for the fiscal year 2025-26, presented on June 10, 2025. This budget plan notably includes a variety of tax and fee increases aimed at enhancing funding for health care and education while deliberately avoiding any hikes in the income tax for high earners.

Key Provisions of the Budget

Among the major changes, a 2-cent increase in the state gasoline tax will be instituted to boost the budget for the Rhode Island Public Transit Authority (RIPTA), which is grappling with significant funding shortfalls. This increased gasoline tax is projected to generate nearly $9 million to help RIPTA close a substantial operating deficit.

Additionally, a new statewide property tax targeting non-owner-occupied homes valued over $1 million has been included in the budget. This tax has been informally dubbed the “Taylor Swift tax.” Furthermore, a range of traffic violation fines will see increments, with most violative charges rising from $85 to $100, as well as an increase in vehicle registration surcharges from $30 to $40.

The budget also introduces a $200 registration fee for electric vehicles and a lower registration fee for hybrid vehicles. The state’s existing 7% sales tax will be applied to short-term parking in garages and metered spaces starting January 1. An increase in the real estate conveyance tax and a rise in the local hotel tax from 1% to 2% are additional noteworthy changes. Revenue generated from taxes on Airbnb rentals will be allocated to municipalities and homelessness programs.

Budget Priorities and Allocation

Legislative leaders have clearly indicated that funding for health care is a top priority. The proposed budget allocates over $40 million for primary care, $38 million for hospitals, and $12 million for nursing homes, contingent upon federal matching funds. Additional measures, including a new health insurance fee, are expected to bring in $30 million annually to support health programs and address systemic issues within the health care sector, particularly the shortage of primary care providers.

This budget proposal is a revision of Governor Dan McKee’s earlier plan and is $119 million larger than the initial proposal. The need for an increased budget comes against the backdrop of an estimated budget deficit, which ranges between $200 million and $400 million for the current fiscal year.

Legislative Approval and Next Steps

The House Finance Committee has approved the proposed budget with an 11-3 vote, advancing it to the full House for consideration, with a vote anticipated on June 17. The new fiscal year is set to commence on July 1.

While the budget outlines significant fiscal adjustments, it notably does not include direct funding for the redevelopment of the Superman building in downtown Providence. Several proposals put forth by Governor McKee, such as purchasing a building for state offices and increasing the cigarette tax, were also omitted from this version of the budget.

Lawmakers have opted to postpone deliberations on increasing the income tax for higher earners, indicating that any potential changes to this matter may be revisited contingent on forthcoming changes to federal fiscal policy.

Conclusion

As government officials continue to navigate fiscal challenges, Rhode Island’s proposed budget represents a strategic effort to boost essential funding for health care and public services through targeted tax increases, while simultaneously addressing a significant budget deficit without imposing direct tax increases on the state’s wealthiest residents.