Home Economy Economic Activity Leaning on fewer people for more revenue is risky for R.I.

Leaning on fewer people for more revenue is risky for R.I.

By

Karl Wadensten

-

04/27/2026

TgQDXYyy-wadensten0306 — Karl Wadensten

I spend a lot of time walking factory floors, sitting with founders and shaking hands with people trying to build something in Rhode Island. Not once in those conversations does someone say, “I’m trying to become a millionaire.” What they say is: “I’m trying to grow.” “I’m trying to hire.” “I’m trying to make this work.” That’s why the

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1 COMMENT

paulette.blagburn@marmoniei.com 04/27/2026 At 2:45 pm

You can’t tax your way into prosperity. If the state truly wants to grow revenue it will become more business friendly and pave the way for greater growth of the base.

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I spend a lot of time walking factory floors, sitting with founders and shaking hands with people trying to build something in Rhode Island. Not once in those conversations does someone say, “I’m trying to become a millionaire.” What they say is:

“I’m trying to grow.”
“I’m trying to hire.”
“I’m trying to make this work.”

That’s why the current debate around a proposed “millionaires tax” deserves a closer look for what it risks, not just for what it raises. The proposal would push Rhode Island’s top income tax rate close to 9% on earnings above $1 million. It’s being framed as targeted and necessary. I understand the pressure to fund essential services. I serve on the R.I. Commerce Corp. board and I see the needs. However, I also see how businesses actually operate. Many of the companies driving growth in Rhode Island are pass-through entities. Their business income is reported on their personal tax returns. When marginal rates rise at the top, that’s not abstract it directly affects how much gets reinvested into the business. Reinvestment is everything. Healthy businesses run on three pillars: capital at risk, employees doing the work and reinvestment back into the company. When reinvestment tightens, everything else does as well. Raises are delayed, training is postponed, equipment upgrades wait and hiring slows. That’s not politics, that’s how businesses actually work. Money is fuel in any system public or private. When it tightens, everything adjusts. Government knows this too: hiring freezes appear, services get consolidated, projects get delayed, and priorities get reshuffled. Business is no different. So it’s fair to ask: Are we focused on the right lever? Today, a relatively small group of taxpayers generates a disproportionately large share of Rhode Island’s income tax revenue. That’s not a broad base, that’s concentration and concentration comes with risk. I don’t need a study to understand how people respond to that kind of pressure. I’m seeing it. Over the past year, I’ve personally met a half-dozen individuals who decided to leave Massachusetts not because they don’t believe in contributing, but because the overall equation no longer worked for them, their businesses, or their families. When people like that move, they don’t just take income with them. They take investment, hiring and future growth. Plus, those decisions don’t show up immediately in a budget forecast. They show up over time. I was in Detroit in 2013, when the city went through bankruptcy. I’ve been back again recently, spending several days on the ground visiting businesses, studying operations, and seeing how companies are rebuilding through disciplined, lean processes. What stands out isn’t just what went wrong. It’s what it takes to come back and how much of that burden falls on the people who are still willing to invest, rebuild and believe in the place. Cities don’t recover on policy alone. They recover when business leaders and local investors decide it’s worth staying, worth reinvesting and worth taking another risk. That kind of decision isn’t automatic. It’s based on confidence. There’s also a Rhode Island precedent worth remembering. In the 1980s, the R.I. Industrial Building Authority helped finance growth across the state, supporting more than 100 companies and nearly 20,000 jobs. If you look at the record, you see it town by town, Cranston, Warwick, Woonsocket, Westerly, companies expanding, hiring, building capacity. The strategy wasn’t to extract more from a narrow group. It was to build a broader base and the revenue followed. We weren’t a perfect state then; however, we were aligned on something important: growth first, revenue second. Today, we risk drifting away from that. Governor Daniel J. McKee often describes himself as a small-business governor. That perspective matters. Running a business teaches you that confidence drives investment and uncertainty slows it. Business owners don’t mind pitching in. They don’t mind paying taxes when they feel part of something growing. However, when policy begins to lean more heavily on a smaller slice of the base, it raises a fair question: Are we strengthening the system or increasing its dependence on fewer people? Rhode Island is the birthplace of the American Industrial Revolution. That’s not just something we say, it’s something we’re responsible for continuing. We need revenue. That’s not in question. However, how we generate it matters. Because the strongest path forward isn’t squeezing a narrow base harder. It’s building a broader one. Because every economy, at some point, depends on the people who are willing to reinvest in it. The question is whether we’re making that decision easier … or harder. Karl Wadensten is a member of the R.I. Commerce Corp. board and president of VIBCO Inc., a manufacturing company based in Richmond. He has spent more than 25 years helping build and retain jobs in Rhode Island’s small and midsized business sector. He also teaches a BUS 410 level Lean Six Sigma Green Belt course at the University of Rhode Island.