PROVIDENCE – Gov. Daniel J. McKee on Thursday released a $14.86 billion spending proposal for the next fiscal year that includes a so-called 'millionaires tax' that was quickly derided by the state's largest chamber of commerce as a "gimmick."
The proposal, an increase of $522.6 million over fiscal 2026, has $5.9 billion in general fund expenditures, a $145.4 million increase over the current budget. The roughly 200-page document was transferred to lawmakers on Thursday.
McKee’s plan includes a so-called 'millionaires tax' of 8.99% on income over $1 million, which the administration projects would bring in $67.1 million in fiscal year 2027 and $135.5 million in fiscal year 2028.
The change would affect approximately 2,300 resident filers and 5,500 nonresident filers, said State Budge Officer Joseph Codega Jr., with 80% of that burden falling on Rhode Island resident taxpayers.
Only minutes after the budget proposal was posted, the Greater Providence Chamber of Commerce released a statement that said any “tax the rich policy” does nothing to control the upward trajectory of state government spending.
"In a state where a majority of higher-income filers in Rhode Island report business income on tax returns, raising personal income tax rates reduces business capital," said the Chamber. “Instead of addressing spending growth and improving efficiency, state leaders are once again looking for a get-rich-quick scheme that is going to erode our long-term prosperity.”
[caption id="attachment_514074" align="alignleft" width="225"]
DIRECTOR OF THE R.I. OFFICE of Management and Budget Brian Daniels, left, and State Budge Officer Joseph Codega Jr. provided an overview of Gov. Daniel J. McKee’s $14.86 billion fiscal year 2027 budget proposal that was sent to the General Assembly Thursday. PBN PHOTO/ CHRIS ALLEN[/caption]
During a press briefing Thursday, Codega and Brian Daniels, director of the R.I. Office of Management and Budget, said the impacts of federal HR 1 left state budget makers in the administration scrambling for new revenue streams.
“They forced our hands on this,” said Daniels. “We need to put more revenue on the table."
While the state’s fiscal outlook has improved somewhat after the November Revenue Estimating Conference, with a deficit currently projected at $100 million, the administration needed to backfill many of the programs that rely on a large part of federal dollars.
All told, the proposal spends $19.3 million to address impacts on Medicaid and SNAP, including
$9.5 million to backfill expired Affordable Care Act subsidies. The administration is budgeting an additional $9.3 million more in fiscal year 2027 for this cost, with the full-year impact projected to be around $13 million.
Healthsource RI projects that without any state intervention, 13,000 people risk losing health insurance.
The plan also seeks to convert the dependent deduction to a fully refundable $325 child tax credit, which would lower personal income tax revenue by $14.7 million in fiscal year 2027 and $29.7 million in fiscal year 2028.
To spur visitation to Rhode Island, McKee’s proposal allocates $1.5 million to support airline routes to T.F. Green International Airport and market the state as a destination for tourism and business travel.
And in preparation for the FIFA World Cup 2026, McKee recommends $250,000 in general revenue for security expenses.
According to the executive summary, most of the operational costs of the tournament stop are expected to be covered through reimbursements from event sponsors and federal grants, and “this funding will serve as a contingency to support state agencies in the event of any unreimbursed expenses.”
There is also $1.4 million from the Rhode Island Capital Plan Fund for repairs and renovations at the Rhode Island House Expo Center in West Springfield, Mass, home of the Rhode Island exhibit at the Big E agricultural fair that houses a replica of the Colony House in Newport and used to promote Rhode Island tourism.
Included in the request for a record-high $600 million in statewide bond referendums is a $50 million "Cultural Economy” bond to fund a State History Center, using $45 million to construct a facility to permanently display the state’s founding documents “and provide space for rotating exhibits and rooms for events, functions, and programming,” according to the executive summary. The remaining money would be for matching grants to municipalities and nonprofits to preserve and renovate publicly accessible historic sites.
Still, projected five-year expenditure growth is now 3.5%, short of the estimated revenue growth of 2.4%. Asked why the proposal did not include any major cuts to offset the federal funding being lost to the state, Codega Jr. called the year-over-year increase “modest” and said that when looking only to growth to the operating budget, the plan is actually a decrease in spending.
“It gets attention. But many of those funds are restricted,” he said. “It’s misleading. So, I hope it’s a more nuanced conversation.”
Other items included in the proposal:
- A constitutional amendment to give the chief executive budget line-item veto power which could be overridden by a three-fifths vote of the legislature
- A three-year phase out of the income tax on Social Security
- A tax amnesty program for the payment of outstanding taxes owed to the state, projected to generate $26.3 million in 2027
- 75-cent increase in the cigarette tax
- Repealing the 2-cent motor fuel tax increase enacted by the General Assembly in the Fiscal Year 2026
- $4 million in general revenue for hospitals for uncompensated care
- An additional 7.5 million in per-pupil education formula aid, a 3.1% increase over 2026
- Truck tolls being reinstated in 2027, generating $20 million
- $3 million to partially reopen the Foxtrot Neighborhood Veteran’s Home
- $2 million to the Rhode Island Community Food Bank
- $10 million in disproportionate share hospitals payments.
(UPDATES throughout with details from budget proposal, reaction from Chamber; MINOR edits.)
Christopher Allen is a PBN staff writer. You may contact him at Allen@PBN.com.
