Tax Foundation report offers overview of R.I. tax rates, policy

THE TAX FOUNDATION'S 2014 Facts and Figures report, released Wednesday, outlined Rhode Island's tax rates and compared them with with rates in the other states. / COURTESY TAX FOUNDATION
THE TAX FOUNDATION'S 2014 Facts and Figures report, released Wednesday, outlined Rhode Island's tax rates and compared them with with rates in the other states. / COURTESY TAX FOUNDATION

WASHINGTON – Rhode Island’s state debt per capita of $8,769 for fiscal year 2012 ranks third-highest in the United States, according to the Tax Foundation’s 2014 “Facts and Figures” report released Wednesday.

The annual report compiles tax and collections data for each of the 50 U.S. states and the District of Columbia, and ranks each state on 39 different measures of tax and fiscal policy.

The Ocean State ranked No. 8 nationwide for highest state and local tax burden per capita as a share of state income, reported at $4,676 for fiscal year 2010, or 10.5 percent of state income. Rhode Island’s ranking was unchanged from the previous fiscal year, when the tax burden was $4,627 per capita or 10.9 percent of state income.

The state with the highest tax burden per capita was New York with $6,622, or 12.6 percent of state income, while Wyoming claimed the lowest tax burden per capita at $3,500, or 6.9 percent of state income.

- Advertisement -

The national average state and local tax burden per capita represented 9.8 percent of state income, or $4,217 per resident.

In accordance with its relatively high tax burden, Rhode Island also performed poorly in the Tax Foundation’s Tax Freedom Day ranking. Tax Freedom Day represents the day of the year (dated from Jan. 1) on which a person in the U.S. will have earned enough money to pay all federal, state and local taxes for the year.

In Rhode Island, Tax Freedom Day for 2013 was April 19, meaning that between Jan. 1 and April 19, the average Rhode Island resident earned enough money to cover all of his or her taxes for that year.

Rhode Island’s Tax Freedom Day ranked at No. 12, where No. 1 represents the state where wage-earners take the longest amount of time to earn “tax freedom” and No. 50 represents the state where residents earn tax freedom the quickest.

Connecticut ranked No. 1 for its Tax Freedom Day on May 13, while Mississippi ranked No. 50 at March 29. Massachusetts’ Tax Freedom Day was April 25 last year, ranking the Bay State at No. 4.

Federal assistance accounted for 34.5 percent of Rhode Island’s general revenue in fiscal year 2012, the Tax Foundation reported, a slight decline compared with fiscal 2011 when federal aid as a share of state income was 38.3 percent. Rhode Island ranked at No. 26 in the nation for federal aid as a percentage of general revenue.

The “Facts and Figures” report also included Rhode Island’s business tax climate, which was previously released in the Tax Foundation’s 2014 State Business Tax Climate Index and reported by Providence Business News. The Ocean State placed at No. 46 in the country for overall business tax climate, above Minnesota, California, New Jersey and New York.

The state business tax climate index is a measure of how each state’s tax laws affect economic performance, in which a No. 1 ranking indicates the most favorable tax system. The index includes an evaluation of corporate income taxes, individual income taxes, sales taxes, unemployment insurance taxes and property taxes.

Massachusetts ranked at No. 25 in the 2014 business tax climate index.

Along with state debt and tax burden information, the Tax Foundation 2014 “Facts and Figures” report also listed state and local rates for individual income taxes, corporate income taxes, general sales taxes, excise taxes, property taxes, and estate and inheritance taxes.

Rhode Island’s estate tax rate, the reduction or elimination of which is under consideration by state policymakers as a potential means to improve Rhode Island’s competitiveness, ranges from eight-tenths of a percent to 16 percent, average among the 16 other states and the District of the Columbia that maintain an estate tax.

However, Rhode Island’s estate tax exemption cutoff – currently $921,655 – is the second-lowest in the country. Only New Jersey’s cutoff at $675,000 is lower, and every other state that levies an estate tax has a cutoff of $1 million or higher. In addition, once an estate has crossed the cutoff line, the entire estate is taxed, not just the value greater than the exemption threshold.

Rhode Island had the 14th highest gasoline tax at 33 cents per gallon, while neighboring Massachusetts ranked at No. 26 with a tax of 26.5 cents per gallon.

Rhode Island’s cigarette excise tax rate of $3.50 was the third-highest in the U.S. The state’s spirit excise tax rate ranked No. 35 at $3.75, its wine tax rate ranked No. 30 at 60 cents and its beer tax rate ranked No. 43 at 11 cents.

Rhode Island’s combined state and local cell phone tax rate as of July 1, 2013 was 6th highest in the U.S. at 14.59 percent. By comparison, Washington’s cell phone tax rate was highest at 18.6 percent and Oregon’s was lowest at 1.79 percent. Massachusetts ranked at No. 35 with its rate of 7.79 percent.

In fiscal year 2012, the Ocean State ranked No. 19 for state tax collections per capita at $2,692. The U.S. average was $2,557, and Massachusetts placed at No. 10 with $3,442.

The state ranked No. 12 for state revenue per capita in fiscal year 2012, reported to be $6,477 per resident. State revenue refers to the U.S. Census Bureau’s general revenue classification, which includes taxes, fees, licenses and intergovernmental revenue.

Earlier this week, Providence Business News reported on a separate Tax Foundation report that placed the Ocean State at No. 2 in the country for its 7 percent state sales tax rate. In terms of combined state and local sales tax rates, however, Rhode Island ranked at No. 21.

To read the full Tax Foundation report, visit www.taxfoundation.org.

No posts to display