State legislators and policy-makers should take seriously the results of a survey released a couple weeks ago by Bloomberg Wealth Manager magazine.
The results of it echo a warning that has been heeded for years by groups like the Rhode Island Public Expenditure Council and others. That being, the tax burden placed on Rhode Island residents is simply too high, especially when compared to that of other states. Even more alarming about the Bloomberg study is that it shows Rhode Island actually taxes its wealthiest citizens – many of them business leaders who have the opportunity to create jobs here – at a rate far surpassing that of other states.
Rhode Island for the fourth consecutive year ranked as the most “wealth-hostile” state in the country – placing 51st in a survey that included all 50 states and Washington, D.C.
The “wealth-friendliness” survey compares the impact of state taxes on salary, real estate, personal property and retirement assets for four hypothetical families. Authors of the survey ran research on tax codes and effects in each state.
The results of the survey, according to Bloomberg Wealth Manager, “demonstrate how tax bite can vary from state to state.” Needless to say, in Rhode Island, that bite is quite painful. For example, the identical set of financial parameters that generated a tax bill of $7,259 last year in Wyoming would cost a family $56,419 in Rhode Island.
Another sobering survey finding is that while some states have improved their ranking since 2004 (Massachusetts, for example, has moved from 35 to 25 during that period), Rhode Island has consistently ranked at the back end of the survey.
The survey points out that state tax revenues are generally rising throughout the country. In fact, for the first quarter of 2004 there has been an 8 percent growth in tax revenues nationwide. But still, many states like Rhode Island are facing huge budget deficits and the allure of raising taxes to remedy those deficits remains.
“State legislators still have to deal with long-term fiscal problems,” said Janet Bamford, who co-authored the report for Bloomberg Wealth Manager.
We do have to deal with long-term fiscal problems. But we must find remedies that do not necessarily include higher taxes on our clothing, our cars and our houses.
Too often we point to our beautiful coastline and sandy beaches. We trumpet our restaurants and theaters and the fact that everything is so accessible here. That is all true. But more often than not, it is about the money. And if we make it too expensive to live here, our young professionals will go live somewhere else, whether that is Arizona or Texas or Florida. Already, Rhode Island has seen a steady increase in professionals establishing residency either in Massachusetts or Connecticut – and in those choosing to retire further south.
Under our current tax structure, it is fair to expect this trend to continue.
And the very idea that we are reaching deeper into the pockets of our wealthy citizens than they would be subjected to in other states is an example of shortsighted economics. These are the folks who invest here, who decide whether it makes good economic sense to expand a company here.
By adding to the tax burden they face, we are making those decisions easy. And they’re not the decisions we want to hear.
