new study recently released by the Institute on Taxation and Economic Policy
(ITEP) and The Economic Progress Institute finds that the lowest-income Rhode
Islanders pay 53 percent more in taxes as a percent of their income compared to
the state’s wealthiest residents.
study, , analyzes
tax systems in all 50 states. The analysis evaluates all major state and local
taxes, including personal and corporate income taxes, property taxes, sales and
other excise taxes. While the top 1 percent of Rhode Islanders (earning over
$467,700 a year) pay 7.9 percent of their income in total taxes, the
lowest-income Rhode Islanders (earning less than $21,700 a year) pay over 12 percent
of their income in taxes.
the Who Pays? study shows,
broad-based graduated personal income taxes are the most equitable way to raise
revenue. Bills submitted in the 2018 legislative session (H-7886 and S-2389)
would have improved the progressivity of the personal income tax by creating
three new tax brackets for higher income earners. Given that low-income people
are paying more of their income in taxes than the richest Rhode Islanders,
lawmakers should carefully weigh the distribution of their taxes, as measured
by Who Pays?, when considering
changes to their tax code.
are also steps lawmakers can take to close this gap, including increasing the
state Earned Income Tax Credit up from its current 15% of the federal credit. Policy
makers should consider reinstating the circuit breaker tax credit for lower-income
and non-elderly disable Rhode Islanders which was eliminated in 2010.Allowing
lower-income Rhode Islanders to keep more of their earnings will help balance
out the current inequity.
the nation fails to address growing income inequality, states will have
difficulty raising the revenue they need over time. The more income that goes
to the wealthy (and the lower a state’s overall tax rate on the wealthy), the
slower a state’s revenue grows over time.
Submitted to Providence American
November 8, 2018
By Juan Espinoza
Economic Progress Institute