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  • No Tinkering With the Tax Code

    No Tinkering With the Tax Code

    Legislation has been introduced to increase state personal income taxes for high earners. House Bill 5227 would add a new income tax bracket for those earning more than $475,000 with a new rate of 8.99 percent, an increase of 50 percent. 

    • Rhode Island’s current top tax rate is 5.99 percent.  
    • Massachusetts’ current top tax rate is 5.0 percent.
    • Connecticut’s current top tax rate is 6.99 percent.
    House Bill 5229 similarly would create a new tax bracket for those earning more than $500,000 with new rate of 6.99 percent, and with revenues resulting from the increase to be deposited in a restricted receipt account for K-12 educational expenses.
     
     
     
    Successful higher income earners and taxpayers are important to the states they reside in for many reasons.
    • They pay a substantial share of income taxes. 
    • They run neighborhood businesses and create jobs. 
    • They are the predominant givers to local charities, social services and our public schools and classroom teachers. 
    • They keep the tax burden moderate for other taxpaying residents. 
    Successful higher income earners and taxpayers are very responsive to changes in tax rates and are willing to move their “official permanent residence” and, therefore, their business.
     
    Any increase in personal income tax rates would adversely affect Rhode Island’s business climate. The great majority of businesses, and nearly all small businesses, report their profits through personal income tax rather than corporate tax. For this reason, any change in rates is essentially a tax on small business.
     
    Business profits are often reinvested in the local economy through new ventures or the expansion of existing businesses. Driving away higher earners also means losing tax revenue paid by the people they employ. Local cities and towns that rely on affluent property taxpayers will be hurt when they have to redistribute the tax burden to lower income individuals. Successful high-income earning taxpayers are mobile. “Working from home” – wherever that may be -- isn’t so difficult after all. 
     
    Our neighborhood businesses are struggling just to continue operations as the economic fallout of the COVID-19 pandemic endures. 
     
    Rhode Island is still down more than 43,500 jobs since January of last year. The leisure and hospitality industry —one of our largest employment sectors—has recovered only about 68 percent of the jobs lost at the beginning of the pandemic. PPP loans and stimulus funds can only go so far in reassuring employers that it is safe to add jobs.
     
    Successful higher income earners and taxpayers are a huge benefit the local economy. Rhode Island’s personal income tax is already among the nation’s most progressive. Tinkering with the tax code now is wrong. As the competition among states for wealth and talent gets even more aggressive, we must send the message that we value fairness, moderation and reasonableness.

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