On Tuesday, June 3, 2008, RIPEC released its annual report on How Rhode Island Compares, a survey which shows how Rhode Island’s state and local tax burden compares to the other 49 states for fiscal years 1996 and 2006. This report finds that for every $1,000 of personal income state and local governments in the Ocean State collect $119.79 in taxes. This amount of taxes paid to support government ranks Rhode Island 10th highest among the 50 states. In other words, the state’s tax collections account for 11.9 percent of personal income.
The report also finds that Rhode Island’s state and local tax burden exceeds those in both neighboring Massachusetts and Connecticut. By comparison, Connecticut ranked 19th highest and Massachusetts 36th. Rhode Island’s state and local tax collections per $1,000 of personal income are 6.6 percent above the national average while those in the Bay State are 6.0 below the national average. Connecticut’s state and local tax collections are slightly above the U.S. average tax collection of $112.41.
Over the ten year period (1996-2006), Rhode Island’s overall tax burden went from 12th highest to 10th highest in the United States. This trend is in marked contrast to Rhode Island’s neighboring states: Massachusetts dropped in the rankings from 23rd highest to 36th, while Connecticut’s ranking fell from 9th highest in the country in FY 1996 to its current ranking of 19th.
The report also finds that Rhode Island’s relative state and local tax rank has changed from FY 2005 when Rhode Island ranked 8th highest. While the state’s overall burden only slightly declined, a number of states have seen increases in their tax burden as a percent of personal income, such as Louisiana, where total taxes as a percent of personal income increased almost 40 percent. Tax policy changes implemented in Rhode Island, increased tax burdens in other states, and changes in personal income have moved Rhode Island to the bottom of the top ten tax burdens in the nation.
As in past years, Rhode Island’s over-reliance on the property tax remains the primary driver behind the state’s ranking; Rhode Island ranked 6th highest in the nation for property tax collections, the same rank as in FY 2005. Property tax collections account for 40 percent of all state and local revenue tax collections compared to the national average of 30 percent. When measured per $1,000 of personal income property tax collections in Rhode Island are 43.1 percent higher than the United States average. Property tax collections in the Ocean State were the highest of the three southern New England states. Connecticut ranked 8th highest and Massachusetts ranked 17th highest for property tax collections in FY 2006.