PROVIDENCE – The Senate Lounge on Thursday became a rare venue for Smith Hill bipartisanship spurred by the growing opposition against proposals such as the so-called "millionaires tax," a 3% surtax on income exceeding $1 million that is part of Gov. Daniel J. McKee's $14.86 billion budget proposal for fiscal year 2027.
A group of lawmakers and business leaders held a media briefing just before the surtax provision and two other key budget articles were set to be reviewed by the Senate Finance Committee – legislation sponsored by Senate Majority Whip David P. Tikoian that would eliminate the estate tax and a phased reduction of personal income tax rates sponsored by Senate Minority Leader Jessica De la Cruz, which proposes a 2% annual reduction in personal income tax rates over five years, beginning in 2027.
Finance Committee Chair Sen. Lou DiPalma, D-Middletown, indicated Thursday morning that the bills would likely be held for further study due to their potential impact on state budget revenues.
De la Cruz said given the state’s failing public schools, crumbling infrastructure and a state budget that has grown more than 50% since 2019, it’s time for a different approach.
“How do we in good conscience ask taxpayers for more?” she asked.
Greater Providence Chamber of Commerce President Laurie White decried what she said was a political philosophy embraced by progressives that the ability to generate additional revenues through taxation is “infinite.”
”These [policies] are exacerbating the situation that we are confronted with today,” she said.
The Chamber reiterated its stance on Wednesday, sending an email to its more than 1,100 members asking them to contact their state senators and representatives and urge them to reject the legislation, including a template testimony letter in opposition saying the proposal could undermine the state’s economic competitiveness “at a time when we should be focused on growth, stability, and attracting investment.”
Opponents have cited Massachusetts, which implemented a 4% surtax on income over $1 million in 2022, generating $2 billion annually but resulting in an exodus of many high-income earners.
The Rhode Island Public Expenditure Council, which has said the surtax would elevate Rhode Island’s income tax rate to the eighth highest in the nation, on Wednesday released a report showing that as of 2024, 20% of residents’ personal income came from government transfers, exceeding the rates in Connecticut, Massachusetts and New Hampshire.
RIPEC CEO and President Michael DiBiase noted that state revenues since 2019 have outpaced the rate of inflation by $600 million.
“Taxpayers deserve to have some of that revenue returned to them,” he said.
Regarding the estate tax, often referred to as the "death tax," which is levied on estates worth more than $1.8 million and can reach as high as 16%, Sen. Thomas J. Paolino, R-Lincoln, said lawmakers must take a different approach to shake off Rhode Island’s reputation as a place unfriendly to wealth creation.
“We don’t make it easy to live here, and we don’t make it easy to die here,” he said.
However, Tikoian sees room for compromise if lawmakers opt to include the tax on millionaires.
”When you do something on one end, maybe it’s time for some relief on the other end,” he said.
Christopher Allen is a staff writer for PBN. He can be reached at Allen@PBN.com.
