Home Economy Economic Activity RIPEC: Major shift in R.I. tax revenue creating imbalances

RIPEC: Major shift in R.I. tax revenue creating imbalances

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PBN Staff

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03/19/2025

RHODE ISLAND is experiencing a major shift in state and local tax revenues, with significant implications for K-12 education, economic opportunity and housing affordability, the according to a new report from the Rhode Island Public Expenditure Council.

PROVIDENCE – A major shift in state and local tax revenue has significantly affected K-12 education, economic opportunity and housing affordability in Rhode Island, according to a report released by the Rhode Island Public Expenditure Council on Wednesday. In its report, “Rhode Island’s State and Local Taxes” RIPEC concludes the state’s tax system has undergone

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PROVIDENCE – A major shift in state and local tax revenue has significantly affected K-12 education, economic opportunity and housing affordability in Rhode Island, according to a report released by the Rhode Island Public Expenditure Council on Wednesday. In its report, “Rhode Island’s State and Local Taxes” RIPEC concludes the state’s tax system has undergone what it calls “a profound transformation the last several years." While property taxes remain the largest single source of state and local tax revenue, RIPEC found their share of the total revenue mix has declined as state tax revenue – primarily income and sales taxes – have grown at a much faster rate, exceeding the rate of inflation. Meanwhile, local property taxes have increased more slowly than inflation, even as property values have boomed. “In Rhode Island, local taxes paid on properties of similar value can differ greatly depending on the city or town where the property is located and how the property is classified,” said RIPEC CEO and President Michael DiBiase. “As Rhode Island experiences a rapid shift in property values and tax burdens, it is critical that state and local policymakers take steps to make our property tax system fairer and more sustainable.” According to the report, net assessed property values have surged by nearly $50 billion since fiscal 2022, a 37% increase, with residential real estate driving this growth. Also, cities with the lowest per-capita property wealth and median incomes have seen some of the most dramatic property value increases. Property tax burdens have been shifting from residential homeowners to businesses, landlords and renters, RIPC said, contributing to higher rents and barriers to economic growth. Significant disparities also exist in property taxes across and within cities and towns. A small to midsize businesses located in municipalities such as Providence, Central Falls, Johnston and West Warwick pays more than $20,000 more in property taxes than their counterparts elsewhere in Rhode Island and in other New England cities. Rhode Island’s K-12 education funding also has seen a shift, RIPEC found, with state aid growing nearly three times faster than local contributions between fiscal year 2019 and fiscal year 2023. At the same time, urban school districts have received a declining share of new state aid. Based on its findings, RIPEC recommends changing the education funding formula to better direct state resources toward urban districts with lower property wealth and higher concentrations of students in poverty, while also requiring "meaningful contributions" from local governments. Also, RIPEC says the state should implement a constitutional amendment to prevent excessive disparities in tax rates across property classes and maintain Rhode Island’s 4% levy cap to protect taxpayers against sudden tax spikes. An annual property revaluation schedule should be considered to create a more predictable and equitable tax system and expand targeted property tax relief for low-income senior citizens and other vulnerable taxpayers.