Editorial: ‘Tax the rich!’

Posted 4/15/21

When state governments need money, they often focus on familiar targets: personal sins (drinking, smoking and gambling), fossil fuels and the rich. In the past year, the COVID-19 pandemic and ensuing …

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Editorial: ‘Tax the rich!’

Posted

When state governments need money, they often focus on familiar targets: personal sins (drinking, smoking and gambling), fossil fuels and the rich. In the past year, the COVID-19 pandemic and ensuing government policies have had a chaotic impact on so many of the Rhode Island government’s typical revenue streams.

Hospitality taxes (dining and entertainment) have taken a nosedive. With nobody going anywhere, gas taxes are not what they once were. And with casinos first shuttered and then restricted to limited capacity, gaming revenues fell off a cliff.

So the spotlight pans to the wealthy.

The Rhode Island General Assembly is currently hearing a handful of “tax the rich” bills that would raise Rhode Island’s top personal income tax bracket from 6 percent to upwards of 11 percent.

Rhode Island already taxes its wealthiest residents more than its closest neighbor, Massachusetts. While Rhode Island has three tax brackets, ranging from 3.75 percent up to 6 percent (for those earning more than $148,350 per year), Massachusetts has a single tax rate of 5 percent for all income levels.

As currently constructed, Rhode Island’s 6 percent income tax on the wealthy is not the best in America, nor is it the worst. There are states taxing high-income earners at 9, 11 or 13 percent, but they happen to be places like New York, Hawaii and California — places that can afford to tax the rich, because the rich aren’t likely to leave. Beautiful as it is, Rhode Island cannot expect the same loyalty from its high-net-worth residents.

Talk to an accountant about what will happen here in Rhode Island if the state nearly doubles the tax rate on its wealthiest individuals. They will have evidence and anecdotes to share about how some of the state’s best and brightest — business owners, CEOs, medical leaders and high-performing professionals — will pick up and leave if the income tax shifts to become one of the most punitive in America. Some already have, since despite its modest 6 percent high-income tax bracket, Rhode Island is still in the top 10 in America for overall tax burdens.

Rhode Island legislators should resist this short-term money grab and be wary of the long-term consequences of driving their wealthiest neighbors to take up residence elsewhere.

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Meet our staff
Jim McGaw

A lifelong Portsmouth resident, Jim graduated from Portsmouth High School in 1982 and earned a journalism degree from the University of Rhode Island in 1986. He's worked two different stints at East Bay Newspapers, for a total of 18 years with the company so far. When not running all over town bringing you the news from Portsmouth, Jim listens to lots and lots and lots of music, watches obscure silent films from the '20s and usually has three books going at once. He also loves to cook crazy New Orleans dishes for his wife of 25 years, Michelle, and their two sons, Jake and Max.