Shifting Burdens in Rhode Island’s Property Tax System

PROVIDENCE, RI – The Rhode Island Public Expenditure Council (RIPEC) released a report today finding that Rhode Island’s property tax system is rife with disparities among taxpayers and across cities and towns. Building on a RIPEC 2022 analysis of property taxes, the report found that an extreme uptick in residential property values over the past few years has led to an acceleration of inequities in the system and exacerbated obstacles to growing the economy and making housing more affordable.

“Property taxes contribute significantly to housing costs for residents and operational costs for businesses, and consequently affect housing affordability and economic development,” said RIPEC President and CEO, Michael DiBiase. “Imbalances in Rhode Island’s property tax system have created inequities among taxpayers and obstacles to addressing these pressing challenges. Despite some important policy developments like the state’s new tangible exemption, Rhode Island’s property tax system overall is unfortunately trending in the wrong direction.”

RIPEC found that residential property makes up most assessed property value statewide (80.8 percent in FY 2024), and its value has increased at a markedly fast rate in recent years, growing by $49.17 billion (60.1 percent) between FY 2015 and FY 2024, and by $24.76 billion since FY 2022 alone—a two-year increase of 23.3 percent. The total assessed value of commercial real estate and tangible property have grown substantially as well, but at about half the pace as residential property.

In response to this trend, Rhode Island cities and towns—which have been granted wide leeway by the General Assembly—have created greater disparity among the rates applied to different classes of property. The statewide effective tax rate for commercial property in FY 2024 was $23.79 per $1,000, 49.5 percent higher than the rate applied to residential property of $14.77 per $1,000—a gap that was 8.2 percentage points greater than in FY 2022. The gap between the effective tangible rate ($37.03) and the residential rate was even greater in FY 2024 (91.5 percent), and had increased by even more since FY 2022 (11.3 percentage points).

With respect to relative property wealth, RIPEC also found that cities and towns hardly resemble each other, which affects their ability to provide services—particularly K-12 education. The statewide total of gross assessed property value per capita was about $160,000 in FY 2022, but nine municipalities had a value of more than $250,000 per capita, while Providence, Pawtucket, and Woonsocket each had per capita values less than $100,000 and Central Falls’ value was less than $50,000.

“We found that nearly 90% of locally-generated revenues in Rhode Island come from property taxes, but that some communities simply do not have enough property tax wealth to support their schools,” said Michael DiBiase. “The funding formula for education has delivered greater state aid to municipalities with low property wealth, but it has not brought us up to national benchmarks for state investment in K-12 relative to local investment, and it has not achieved equitable school funding.”

Together, relative property wealth, service needs, and policy choices have a substantial effect on taxpayers, RIPEC found. In FY 2024, the tax burden for Rhode Island resident homeowners with $425,000 in assessed property value ranged across cities and towns by over $7,000 and was as high as $9,635 in Foster. The tax burden in FY 2024 for a business with $1.0 million in real estate value and $200,000 in tangible property ranged across cities and towns by nearly $40,000 and was as high as $45,780 in Providence.  

While taxpayers across communities face substantial disparity, so do many taxpayers within the same community. In Providence, which has wide classification differences and the state’s most generous homestead exemption, a five-unit residential dwelling valued at $1.0 million would see a tax bill of $10,280 in FY 2024 for a resident owner and $18,350 for a non-resident owner, and a six-unit dwelling also valued at $1.0 million would be classified as commercial property and have a tax bill of $35,100—nearly $25,000 greater than the residential homeowner amount.

“We hope that this report and its findings can help to guide state and local policymakers as they begin formulating tax policy decisions for the next fiscal year,” said Michael DiBiase.

Based on its findings, RIPEC makes several recommendations to policymakers:

  • State policymakers should consider reforms to Rhode Island’s education funding formula that better respond to large disparities in property wealth among cities and towns.
  • The state should maintain and strengthen the 4.0 percent levy cap by ensuring that it applies to all property tax revenues and that state agencies have access to all appropriate measures of enforcement.
  • The use of classification differences and homestead exemptions by cities and towns should be minimized.
  • State policymakers should consider increasing the tangible personal property exemption, and cities and towns should work to streamline reporting to reduce the administrative burden of the tangible tax.
  • Policymakers should consider adopting separate tax rates on apartment buildings to allow for reduced tax rates on these properties.
  • Policymakers should consider expanding or adopting more means-tested tax relief programs, especially for the elderly and disabled individuals. 
  • The state should hold fire districts to the same reporting requirements as cities and towns, and should ensure that state agencies have appropriate measures to enforce requirements.

You can find an executive summary here.

In addition, an interactive data set that allows users to customize the data and visualizations of this report based on their needs and interests is available here.

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