PROVIDENCE – Property taxes are the single biggest source of state and local tax revenue in Rhode Island, accounting for nearly $1.7 billion in the 2005 fiscal year, almost as much as the state’s $1.8-billion collections for personal income taxes and sales taxes combined.
The figures come from a new report by the Rhode Island Public Expenditure Council that analyzes the state’s 39 municipal property tax burdens and the overall growth in the local property tax base. The report also compares Rhode Island’s reliance on property taxes to fund local services with how other states pay for them, and recommends several changes.
RIPEC, a business-backed think tank, has long advocated for reforms to ease the burden on property owners, noting that there are big differences among municipalities in terms of tax capacity and effective tax rates.
Based on a home valued at $300,000, RIPEC’s new report says, estimated fiscal 2005 tax bills ranged from $1,314 in Little Compton to $6,474 in Coventry. The estimated effective tax on homes valued at $300,000 ranged from a low of 0.44 percent in Little Compton to a high of 2.16 percent in Coventry.
Based on a commercial property with $1 million in real-estate value and $200,000 in tangible property, the tax burden ranged from $45,679 in Providence to $5,287 in Little Compton, RIPEC found. The effective tax ranged from a high of 3.81 percent in Providence to a low of 0.44 percent in Little Compton.
The report notes that as of 2002, Rhode Islanders paid an average of $45.86 per $1,000 of personal income toward property taxes, the sixth-highest burden in the nation and 43 percent above the national average.
The report also shows a dramatic growth in Rhode Island property values in the last decade, from $56.6 billion in fiscal 1995, to $113.2 billion in fiscal 2005 – more than doubling in absolute terms, or 58.8 percent after adjusting for inflation.
RIPEC is recommending several measures that it says would provide direct property tax relief, restrict further growth in property taxes, and improve the administration and equity of tax administration:
The full report, titled “FY 2005 Property Tax Burdens in Rhode Island,” is available online (in PDF format) at www.ripec.org.
