PROVIDENCE – The Rhode Island Public Expenditure Council is expressing concerns about legislation that would increase the state's top income tax rate from 5.99% to 8.99% for income exceeding $625,000, a change that would represent a 50% hike aimed at high-income earners.
RIPEC said in a report published Tuesday that the state could face long-term economic risks, including potential declines in state revenues, business growth and philanthropic contributions from such a change.
The state, which already experiences low domestic migration rates, may worsen this trend by driving away top earners, RIPEC said.
Michael DiBiase, RIPEC CEO and president, said that while increasing taxes on high earners may seem attractive, it could ultimately jeopardize Rhode Island's already fragile competitive position, calling the proposal “a solution in search of a problem.”
Introduced by Rep. Karen Alzate, D-Pawtucket, and Sen. Melissa Murray, D-Woonsocket, the companion bills would set the new tax tier after Jan. 1, 2026.
The state has a projected structural deficit of $300 million for fiscal year 2026. But RIPEC said that while Rhode Island's income tax structure has “become increasingly uncompetitive,” many other states are moving in the opposite direction by reducing the number of income brackets and lowering top rates.
And higher earners already pay a significant portion of their income to the state, the group said. In 2022, Rhode Island taxpayers with a single or family income of $500,000 or more constituted just 1% of total tax returns while contributing 35% of the overall statewide tax liability, according to RIPEC.
Despite the state's budget gap, income tax revenues have been rising recently, growing at an annual rate of 6.2% from fiscal years 2019 to 2025, nearly double the rate of inflation, all without any broad-based tax increases.
The report said that raising taxes on high-income individuals would significantly affect businesses since a majority of business income in Rhode Island is reported through individual income tax rather than corporate income tax.
Instead of raising rates, RIPEC advocated changing the tax system to enhance competitiveness and focusing on policies that spur broad economic growth.
“The data demonstrate that Rhode Island’s tax system already imposes a significant burden on high earners and small businesses,” DiBiase said. “Rather than increasing rates, we should explore avenues to make our tax code more competitive and supportive of economic growth."
Christopher Allen is a PBN staff writer. You may contact him at Allen@PBN.com.
