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Rhode Island Proposes High-Income Tax Amid Migration Woes

Lawmakers discussing high-income tax legislation in Rhode Island State House

News Summary

Rhode Island lawmakers are introducing a high-income tax targeting the wealthy, proposing a 3% surtax on incomes over $625,000. This decision draws lessons from Massachusetts’ recent surtax increase, which saw significant tax revenue but also a notable outmigration of residents. With nearly 67% of those who left Rhode Island citing high living costs as their reason, concerns arise about the potential economic impact and business climate. As the debate heats up, both supporters and opponents prepare for a political battle over the future of taxation in the state.

Rhode Island Eyes New High-Income Tax Legislation Amid Massachusetts’ Migration Woes

In a bold move that’s turning heads, lawmakers in

Rhode Island

are proposing a new high-income tax aimed at the state’s wealthiest residents. Spearheaded by Representative Karen Alzate and Senator Melissa Murray, the plan suggests a 3% surtax on those whose taxable income exceeds $625,000. This isn’t just a random thought popping up in the State House. It reflects a growing conversation about taxation and economic vitality in the region, especially in light of the recent experience across the border in

Massachusetts

.

Learning From the Bay State’s Experience

Massachusetts introduced a 4% surtax on incomes surpassing $1 million in 2022, and the initial results were striking. The first year alone brought about $2.2 billion into the state’s coffers. But, not all that glitters is gold. While the state was filling its piggy bank, it witnessed a hefty exodus of residents. Reports reveal a net outmigration of

45,614 tax filers

between 2021 and 2022, leading to a staggering $3.9 billion drop in taxable income. Yikes! That should raise some eyebrows in Rhode Island, don’t you think?

The tax hike in Massachusetts raised the top rate to 9%, nearly double what high earners were previously paying. Surveys soon followed, showing that a whopping

82%

of accountants reported that their wealthier clients were eyeing the exit signs, intending to leave the state within a year. And if that wasn’t enough, Massachusetts found itself ranked

49th out of 50

for population growth according to UHaul’s index. Talk about a wake-up call.

Demographics Matter

The demographic data tells an alarming story. A large portion of those leaving – around

44%

of the outbound movers – were aged 26-44. This age group is crucial for future family formation and overall economic stability. Massachusetts is now facing projections that they might lose nearly

$1 billion in annual revenue by 2030

if this outmigration trend continues. This serves as a serious cautionary tale for our friends in Rhode Island.

Rhode Island’s Unique Challenges

In March 2023, nearly

67%

of Rhode Island residents who packed their bags and left for states without income tax cited the high cost of living, particularly due to taxes, as their main reason for leaving. It’s clear that many are feeling the financial pinch. Compounding this situation, the
Providence City Council has also jumped into the mix, passing a resolution to support tax increases beyond the current 4% state cap to meet legal obligations for local schools. This indicates further fiscal challenges ahead for the Ocean State.

The Business Climate Concern

Adding to the concerns, Massachusetts saw a significant decline in its business tax climate, dropping from

34th to 46th

after the new surtax was enacted. This decline has shifted perceptions about the state’s competitiveness. As discussions about high-income taxes heat up, sentiments of “Taxifornia” are rising as Rhode Islanders worry about potential economic fallout similar to that of Massachusetts.

The Debate Heats Up

Proponents of Rhode Island’s new tax plan suggest it has the potential to generate an estimated

$190 million

annually, targeting the state’s richest residents. However, strong opposition from various business groups indicates a heated political battle is on the horizon. Advocates promote the idea that the funds from these increased taxes could help meet urgent needs like education, mental health services, and housing support.

Your Thoughts?

As Rhode Island treads lightly into potential high-income tax legislation, the lessons learned from Massachusetts could guide the way. Will residents welcome these changes, or will they follow the trends seen in neighboring states? Perhaps it’s time for a community conversation about what’s best for the Ocean State’s future!

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STAFF HERE BOSTON WRITER
Author: STAFF HERE BOSTON WRITER

BOSTON STAFF WRITER The BOSTON STAFF WRITER represents the experienced team at HEREBoston.com, your go-to source for actionable local news and information in Boston, Suffolk County, and beyond. Specializing in "news you can use," we cover essential topics like product reviews for personal and business needs, local business directories, politics, real estate trends, neighborhood insights, and state news affecting the area—with deep expertise drawn from years of dedicated reporting and strong community input, including local press releases and business updates. We deliver top reporting on high-value events such as Boston Marathon, Head of the Charles Regatta, and Boston Harborfest. Our coverage extends to key organizations like the Greater Boston Chamber of Commerce and Associated Industries of Massachusetts, plus leading businesses in finance, biotech, and insurance that power the local economy such as Fidelity Investments, Biogen, and Liberty Mutual Insurance. As part of the broader HERE network, we provide comprehensive, credible insights into Massachusetts's dynamic landscape.

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