As Rhode Islanders, we pride ourselves on grit, ingenuity and community – values that built this state and fuel its economy to this day. That’s why the latest proposal from the General Assembly – Bill S0329, a 3% surtax on income over $625,000 – isn’t just misguided, it’s dangerous.
This so-called “millionaire’s tax” is being pitched as a tax on the wealthy. But in practice, it targets the very people who keep Rhode Island’s economy moving – our small business owners, entrepreneurs and job creators. These aren’t faceless billionaires. They’re people like Angela, who runs an auto shop in Warwick, or Matt, who runs a marine repair business in Narragansett, or Rosa, who owns a child care center in Cranston.
More than 82% of businesses in Rhode Island are structured as pass-through entities – S-corporations, LLCs and, sole proprietorships. In these businesses, profits pass through to the owners’ personal income taxes, even if the money stays in the business. That means the income is taxed as personal income, even though it’s being used for payroll, repairs, inventory or growth – not personal spending.
Let me give you a simple example.
Angela owns an auto shop. Last year, the shop had $650,000 in profit after expenses. Angela paid herself $90,000 in salary and invested the rest in her business with new equipment, hiring another technician and growth.
However, because she’s an S-corporation, the government treats the full $650,000 as her personal income – even though she never actually saw that money.
Come April 15, Angela owes taxes on all $650,000, and under Bill S0329, she'd owe a 3% surtax on the portion over $625,000. That's a tax on money she didn’t pocket, but kept in the business to fuel growth and hire local talent.
That’s not a tax on the rich. That’s a tax on responsibility, on reinvestment and on risk.
We’ve seen the warning signs.
In 2023, Massachusetts passed a similar surtax. What happened? 90% of CPAs reported clients actively considering leaving the state, with 64% claiming the tax was the direct cause.
The top relocation states? Florida, Texas and New Hampshire.
We should learn from this – not repeat it. Especially when Rhode Island is already ranked last in the nation for starting a business.
This bill sends the wrong signal: that Rhode Island punishes success, penalizes investment, and misunderstands how small businesses really operate. It also comes at the worst time – when inflation, labor costs and economic uncertainty are already straining local businesses to the breaking point.
There is a a better path forward
I’m not here to say we shouldn’t raise revenue. I’m here to say we should do it by growing the economy, not taxing the life out of it.
When companies grow, they hire more people, buy more goods and pay more taxes. That’s how you generate sustainable revenue. That’s how you build a resilient economy. Through expansion, not extraction.
Bill S0329 doesn’t tax wealth – it taxes activity. It taxes the choice to build something here and risks pushing our best business owners, builders, and doers out of the state entirely.
We need tax policy that is neutral, transparent, and pro-growth – not policy that punishes the very people trying to reinvest in Rhode Island.
For the sake of the state we love, and the people who fight to keep its economy alive, I urge the General Assembly to reject this bill.
Let’s choose a path forward that honors our roots and builds a stronger, more prosperous Rhode Island for all.
Editor's note: Bill S0329 is currently being held for further study after being heard in committee in both the House and Senate.
Karl Wadensten is a member of the R.I. Commerce Corp. board and president of VIBCO Vibrators, a manufacturing company based in Richmond. He has spent more than 25 years helping build and retain jobs in Rhode Island’s small and mid-sized business sector.
Thank you Karl, well put. The difference between a family of 4 making $600,000 a year and a family of 4 living on the streets is ONE bad year. The biggest reason for that is that they’re already paying close to 50% of their income in taxes. This is common sense.