Taxes Would Increase For Top RI Earners Under New Law

PROVIDENCE, RI — A proposed law seeks to close Rhode Island's budget gaps by increasing taxes on the state's top earners. If signed into law, the top 1 percent of earners would see a 3 percent increase on their tax bill.

The bill calls for the addition of a new state tax bracket with a marginal rate of 8.99 percent on all earnings over $475,000. Under the current law, taxes cap out at 5.99 percent.

Rep. Brandon Potter, one of the bill's co-sponsors, estimated that the change would raise approximately $128.2 million of the state. This is even more critical during the COVID-19 pandemic, he argued, when the state government, municipalities and school districts are stretched extra thin financially.

"Particularly at a time when many, many Rhode Islanders are struggling even more as a result the economic effects of a pandemic that is about to stretch past the year mark, we need to stop looking at cuts to vital programs as our only means to close our budget gaps," Potter, who represents Cranston, said. "Our systems have helped the rich get richer. Asking them to pay their fair share at such a critical time is reasonable, and a much better alternative to deepening cuts to the safety net programs that are vitally needed by so many right now."

If the bill were to become law, the vast majority of Rhode Islanders would see no change to their tax bill, and the higher rate would apply to income over the $475,000 threshold. For someone who makes $500,000 per year, that would be an increase of $750 in taxes owed to the state.

The Economic Progress Institute threw its support behind the legislation, saying it would not adversely impact small businesses. More than 90 percent of businesses in the state do not fall into this tax bracket and would therefore not be affected, the organization said.