Study finds the wealthy pay a lesser share of their income in taxes in R.I.

By  -October 18, 2018 4:01 pm

PROVIDENCE – The greater your income in Rhode Island, the less of it you pay in state and local taxes, a new study finds.

The top one percent of Rhode Islanders [those making more than $467,700 a year] pay 7.9 percent of their income in total state and local taxes, while the bottom 20 percent [those earning less than $21,700 a year] pay 12.1 percent of their income in such taxes.That’s a 53 percent difference, according to a study released this week by the Washington, D.C.-based Institute on Taxation and Economic Policy and analysis from the Providence-based Economic Progress Institute, two think tanks that advocate for tax fairness and income equality.Titled “Who Pays? A Distributional Analysis of the Tax Systems in all 50 States,” the study evaluated all major state and local taxes, including personal and corporate income taxes, property taxes, sales and other excise taxes.

Rhode Island’s state and local tax levels are higher than the national average. Nationwide, the top one percent pay 7.4 percent of their income in state and local taxes, while the bottom 20 percent pay 11.4 percent of their income, the study found.

The states with the least equitable income-to-tax ratios were Washington, Texas, and Florida. The states with the most equitable income-to-tax ratios were California, Vermont, and Delaware. Rhode Island ranked at No. 32 among the 50 states and the District of Columbia, with No. 1 being the least equitable and No. 51 being the most equitable.

In 2015, the last time such a study was performed, the top one percent of Rhode Islanders paid 6.3 percent of their income in state and local taxes, while the bottom 20 percent paid 12.5 percent.

Those numbers suggest the disparity in Rhode Island has decreased in the last three years, but the comparison to this year’s study is not ideal because a “different methodology” was used for the previous study, said Juan Espinoza, a spokesman for the Economic Progress Institute.

In addition, the study found income-to-tax disparities are slight among the bulk of Rhode Islanders. For example, the five categories of income earners in between the top one percent and the bottom 20 percent paid between 9 percent [for those just below the top earners] to 9.5 percent [for those in the middle-to-lower income categories].

Although more equitable than in many states, the think tanks called the Rhode Island’s tax system “regressive.” Rhode Island has a graduated state income tax, but the groups called for greater steps to erase disparities.

“The wealthiest Rhode Islanders have benefited most from our growing economy,” Economic Progress Institute Executive Director Rachel Blum said in a statement. “It’s not unreasonable to ask the highest-income residents and corporations to pay their fair share of state and local taxes.”

The group said government leaders in Rhode Island and other states should be concerned because, if the nation fails to address growing income inequality, states will have problems raising the revenue they need over time.

The study had other statistics for Rhode Island’s income levels: The top one percent had average income of more than $1.1 million a year; the next four percent had average income of $292,600 a year; and the next 15 percent had average income of $141,700 a year. Those groups composed the top 20 percent.

The remaining 80 percent broke down as follows: The bottom 20 percent had average income of $11,000 a year; the next 20 percent had average income of $28,600 a year; the middle 20 percent had average income of $45,700 a year; and the next 20 percent had average income of $75,600 a year.

Scott Blake is PBN staff writer. Email him at [email protected]

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