PROVIDENCE, RI –  The Rhode Island Public Expenditure Council (RIPEC) has released a new report analyzing a major shift in Rhode Island’s mix of state and local tax revenues, with significant implications for education funding, the state’s economy, and housing affordability.

RIPEC’s report finds that Rhode Island’s tax system has undergone a profound transformation in the last several years. While property taxes remain the largest single source of state and local tax revenue, their share of the total revenue mix has declined as state tax revenues—primarily income and sales taxes—have grown at a much faster rate, exceeding the rate of inflation. Meanwhile, local property taxes have increased more slowly than inflation, even as property values have boomed.

“In Rhode Island, local taxes paid on properties of similar value can differ greatly depending on the city or town where the property is located and how the property is classified,” said RIPEC’s President & CEO Michael DiBiase.  “As Rhode Island experiences a rapid shift in property values and tax burdens, it is critical that state and local policymakers take steps to make our property tax system fairer and more sustainable.”

“This report highlights key challenges around the way we raise tax revenues to fund K-12 education—some of the state’s least wealthy districts experienced relatively low increases in state education aid and even smaller increases in local aid,” added RIPEC’s Director of Policy & Research Justine Oliva. “Given the inequities between taxpayers and communities, the report provides a roadmap for reforms to promote economic opportunity, housing affordability, and equitable school funding.”

• Net assessed property values have surged by nearly $50 billion since FY 2022, marking a 37% increase, with residential real estate driving this growth.
• The cities with the lowest per capita property wealth and median incomes have seen some of the most dramatic property value increases.
• Property tax burdens have been shifting at an expedited rate from residential homeowners to businesses, landlords, and renters, contributing to higher rents and barriers to economic growth.
• Rhode Island’s K-12 education funding also has seen a shift, with state aid growing nearly three times faster than local contributions between FY 2019 and FY 2023. At the same time, urban school districts have received a declining share of new state aid.
• Significant disparities exist in property taxes across and within cities and towns. A small to medium-sized business located in municipalities like Providence, Central Falls, Johnston and West Warwick, pays over $20,000 more in property taxes than their counterparts elsewhere in Rhode Island and in other New England cities.

Recommendations:

Based on these findings, RIPEC makes several policy recommendations aimed at increasing tax fairness, ensuring equitable education funding, and promoting economic opportunity and affordability:

• Reforming the education funding formula to better direct state resources toward urban districts with lower property wealth and higher concentrations of students in poverty, while also requiring meaningful contributions from local governments.
• Implementing a constitutional amendment to prevent excessive disparities in tax rates across property classes.
• Maintaining Rhode Island’s 4% levy cap to protect taxpayers against sudden tax spikes.
• Considering an annual property revaluation schedule to create a more predictable and equitable tax system.
• Expanding targeted property tax relief for low-income senior citizens and other vulnerable taxpayers.

Together with this report, RIPEC has launched a new interactive data dashboard to serve as a resource for Rhode Islanders—including state and local policymakers, businesses, and property owners—seeking important information about property taxes. The dashboard includes tools for comparing and sorting key data along factors like year, community, and property class. It features state and municipal-level data on property values, property tax rates, property tax levy increases, K-12 revenue increases, and more.