PROVIDENCE R.I. (March 2017) – Today RIPEC released its annual report, How Rhode Island Revenues Compare: 2016 Edition, which provides details on state and local government revenue sources from Fiscal Year (FY) 2014, the most recent year for which state and national data are available. The publication compares Rhode Island’s fiscal system with those of the other 49 states and the national average using data released by the US Census Bureau.
Rhode Island continued to have one of the highest tax burdens of any state in the nation in FY 2014, ranking 13th highest per $1,000 of personal income and 14th highest per capita. Among the New England states, Rhode Island’s total tax collections ranked fourth highest on both a personal income and per capita basis. Since FY 2004, Rhode Island’s total nominal tax revenues grew by 29.8 percent, compared to 47.5 percent growth nationally. Because of this relatively slower rate of growth, Rhode Island’s national ranking improved since FY 2004, when the state had the seventh highest tax burden on a personal income and per capita basis.
Property taxes remained the largest driver of the overall tax burden in the state, accounting for 44.6 percent of all FY 2014 tax revenues in Rhode Island. By contrast, in the U.S. as a whole, property taxes only accounted for 31.3 percent of total state and local tax revenues. The state’s property tax burden remained among the highest in the country in FY 2014, ranking fifth highest as a share of personal income and seventh highest per capita. Nominal property tax collections continued to grow in Rhode Island between FY 2004 and FY 2014, increasing by 38.4 percent. Reliance on the property tax also increased over the same ten year period – property taxes as a share of total tax revenues increased by 2.8 percentage points, from 41.9 percent in FY 2004 to 44.6 percent in FY 2014.
On other taxes, Rhode Island’s FY 2014 collections were more comparable to the national average. When measured on a per capita basis, Rhode Island’s FY 2014 individual income tax collections were 24th highest, general sales tax collections were 32nd highest and other tax collections were 29th highest.
In FY 2014, state and local governments in Rhode Island collected total revenues of approximately $12.5 billion, nearly $0.5 billion (3.9 percent) above FY 2013 levels. Year-over-year growth in the country as a whole, however, was greater – state and local governments across the nation collected total revenues of approximately $3.6 trillion in FY 2014, about $0.2 trillion (6.7 percent) greater than FY 2013 levels. In both Rhode Island and the U.S. as a whole, a significant factor contributing to total revenue growth was an increase in non-general revenue collections, which includes insurance trust, utility and liquor store revenue. Between FY 2013 and FY 2014, growth in non-general revenues accounted for 58.3 and 65.8 percent of total Rhode Island and U.S. revenue growth, respectively.
“As the data indicate, the overall tax burden in Rhode Island remains high relative to the rest of the country,” said John C. Simmons, Executive Director of RIPEC. Simmons added, “In particular, the property tax continues to place a substantial burden on individuals and businesses in the state, despite attempts to restrain levy growth, such as the property tax cap.” Property taxes levied against businesses have a particularly strong negative impact, according to the Tax Foundation, by discouraging start-ups and small businesses. According to Simmons, “Policymakers seeking to promote economic development in the state should focus on reducing the property tax burden, especially for businesses. Systemic property tax reform will improve the overall business climate in the state, and allow us to gradually move away from the current incentives-based economic development strategy.”
