PROVIDENCE R.I. (November 2018) – Today RIPEC released its annual report, How Rhode Island Revenues Compare: 2018 Edition, which provides details on state and local government revenue sources from Fiscal Year (FY) 2016, 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 U.S. Census Bureau.
Rhode Island continued to have one of the highest tax burdens in the nation in FY 2016, ranking 7th highest per $1,000 of personal income and 12th highest per capita. Among the New England states, Rhode Island’s total tax collections ranked 3rd highest on a personal income basis and 4th highest per capita. Since FY 2006, Rhode Island’s total nominal tax revenues grew by 25.7 percent, compared to 32.7 percent growth nationally. Though Rhode Island’s growth was below the national average, its ranking increased from 10th highest per $1,000 of personal income in FY 2006, while its per capita ranking remained unchanged at 12th highest.
Property taxes remained the largest driver of the overall tax burden in Rhode Island and the New England region, accounting for 43.4 percent of all FY 2016 tax revenues in Rhode Island. By contrast, in the U.S. as a whole, property taxes only accounted for 31.5 percent of total state and local tax revenues. The state’s property tax burden remained among the highest in the country in FY 2016, ranking 4th highest as a share of personal income and 6th highest per capita. Nominal property tax collections continued to grow in Rhode Island between FY 2006 and FY 2016, increasing by 35.3 percent compared to 38.0 percent nationally. Reliance on the property tax also increased over the same ten-year period – property taxes as a share of total tax revenues increased by 3.1 percentage points in Rhode Island, from 40.3 percent in FY 2006 to 43.4 percent in FY 2016.
It is worth noting, however, that these data do not yet capture the phase out of the automobile tax in Rhode Island, which passed during the 2017 session of the Rhode Island General Assembly. The phase-out began in FY 2017 and the tax will be completely eliminated by FY 2024. The elimination of this tax should make a notable dent in Rhode Island’s tax burden, reducing collections by approximately $220.6 million, or 3.8 percent of FY 2016 total tax revenues and 8.6 percent of FY 2016 property tax revenues.
On other taxes, Rhode Island’s FY 2016 collections were closer to or slightly below the national average. When measured on a per capita basis, Rhode Island’s FY 2016 individual income tax collections were 19th highest in the nation, general sales tax collections were 36th highest and other tax collections were 23rd highest. Similarly, on a personal income basis, individual income tax collections were 27th highest in the nation, general sales tax collections were 38th highest and other tax collections were 26th highest.
In FY 2016, state and local governments in Rhode Island collected approximately $11.8 billion in total revenues, an increase of approximately $53.3 million (0.5 percent) from FY 2015 collections. Nationally, by contrast, revenues totaled $3.4 trillion, representing a decrease of $12.2 billion (0.4 percent) since FY 2015. In Rhode Island, a significant factor contributing to this year-over-year revenue growth was the increase in total tax collections, which grew by $156.5 million (2.7 percent). Within total tax collections, Rhode Island’s property taxes experienced the greatest year-over-year growth, increasing by $84.3 million (3.4 percent), followed by other taxes (including corporate income, selective sales, motor vehicle license and all other taxes), which increased by $37.4 million (3.5 percent).
“As the data indicate, the overall tax burden in Rhode Island remains high relative to the rest of the country. In particular, the property tax continues to place a substantial burden on individuals and businesses in the state,” said John C. Simmons, Executive Director of RIPEC. Once again, however, it is worth pointing out that these data do not yet capture the phase out of the automobile tax in Rhode Island, which should make a notable dent in Rhode Island’s tax burden. According to Simmons, “Policymakers seeking to promote economic development in the state should continue to focus on reducing the cost of doing business. Such systemic reforms will continue to improve the overall business climate in Rhode Island, and allow us to gradually move away from the current incentives-based economic development strategy.”