Rhode Island Proposes Tax Hike for High Earners

News Summary

Concerns are mounting over proposed legislation in Rhode Island to raise the top income tax rate from 5.99% to 8.99% for high earners. The Rhode Island Public Expenditure Council warns of financial implications, while public hearings highlight citizen fears of increased taxes leading to higher rents and displacement. Mayor Brett Smiley’s budget proposal also reflects a significant tax increase for homeowners. The city explores alternative revenue sources as it grapples with education funding inequities.

Providence – Concerns have been raised about proposed legislation in Rhode Island aimed at increasing the state’s top income tax rate from 5.99% to 8.99% for high earners, particularly individuals earning over $625,000. The Rhode Island Public Expenditure Council (RIPEC) has highlighted potential long-term financial implications related to this proposed tax hike, which would amount to a substantial increase of 50% targeted at high-income individuals.

In a related development, approximately 100 residents participated in a public hearing conducted by the Rhode Island House Committee on Municipal Government and Housing, where they expressed their opinions on various tax-related proposals. Many citizens stood in line for over two hours to testify regarding a bill seeking to raise Providence’s tax revenue cap beyond the current 4% statewide limit for fiscal year 2026. This amendment, sponsored by Representative Rebecca Kislak and backed by other Democratic representatives, would permit Providence to increase its tax levy by up to 8% more than the previous year.

Mayor Brett Smiley has proposed a 7.5% increase in his fiscal 2026 budget, significantly impacting homeowners. Under this proposal, the average tax bill for owner-occupied homes is expected to rise by 4%, while properties containing two to five family units may experience increases of as much as 16%. These tax hikes are designed to address financial challenges that have arisen from a settlement with the state education department regarding historical underfunding issues regarding Providence public schools. This settlement includes an allocation of $11 million for the upcoming fiscal year, contingent upon approval from the state legislature. Should the necessary legislative approval not be attained, the city will be required to make substantial revisions to its budget.

During the public hearing, numerous testimonies indicated community apprehensions surrounding the impact of tax increases on renters. Many residents expressed fears that rising taxes could lead to increased rents, consequently resulting in displacement for lower-income families. Concerns were also raised about existing property tax exemptions for senior citizens, with many residents deeming them inadequate in light of rising living costs. Representative David Morales has pointed out the lack of a contingency budget should the proposed tax increases fail, emphasizing the need to consider the perspectives of working residents.

The Chief of the House Committee reminded attendees to keep their focus on the specific bill at hand, avoiding broader critiques of the housing market in Providence. The proposed bill is still under consideration, awaiting further study by the committee, a standard procedure for initial legislative discussions.

In addition to the proposed increases, the city is exploring alternative revenue streams, including potential taxes on parking lots and Airbnb rentals. A spokesperson for the City Council announced that community meetings are planned to allow residents a platform to voice their tax-related concerns, particularly regarding property valuations. Mayor Smiley acknowledged the significant financial impact of tax-exempt properties on the city, specifically those owned by universities and hospitals that do not contribute to the tax base.

Representative Kislak has reiterated the urgency of addressing the long-standing inequities in school funding, committing to resolve these issues within a three-year timeframe. The proposed tax legislation and the accompanying debates reflect the broader discussions within Providence regarding taxation, revenue generation, and the financial implications for the community as a whole.

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Additional Resources

• Rhode Island Current: Providence Residents Pack State House Hearing
• WPRI: Smiley’s $624 Million Budget Proposal Raises Property Taxes
• GoLocalProv: Rhode Island Has 8th Highest Tax Burden in U.S.
• Wikipedia: Income Tax in the United States
• Providence Journal: Tax Hike for Rhode Island Top Earners Proposed
• Kiplinger: State by State Guide to Taxes in Rhode Island