Charts: Regressive RI taxes getting (slightly) more progressiveJanuary 30th, 2013 at 12:35 pm by Ted Nesi under Nesi's Notes, On the Main Site
For more than a decade, state and local taxes in Rhode Island have been among the nation’s most regressive – meaning they’re structured to take a larger share of income from the poor than they do from the wealthy.
That said, a WPRI.com analysis of the last decade’s “Who Pays?” studies from the Institute on Taxation and Economic Policy shows the richest Rhode Islanders are paying slightly more of their incomes in state and local taxes than they were in 2002, while the poorest are paying a bit less.
That doesn’t necessarily contradict progressives’ argument that wealthier Rhode Islanders have gotten a tax cut: the studies show the share of income paid by the top 1% in income taxes fell from 5.8% in 2002 to 4.8% in 2013. But that reduction was offset by an increase in how much the top 1% paid in property taxes, which rose from 2% to 3.1%. Here’s how the tax mix for the top 1% has changed over the last decade:
At the other end of the income spectrum, the poorest 20% of Rhode Islanders stopped paying income taxes after 2002 and have also seen very small reductions since then in their sales and property tax bills as a share of income. But they still lose more of their income to state and local government than the rich:
Of course, there’s more to the equation than the tax percentages – the share of income anyone pays also reflect any changes in pre-tax income over time, because that changes the denominator.
Between the 2002 and 2013 studies, the average Rhode Island family in the top 1% saw its income rise about 20%, from $757,400 to $912,400. (That’s down, however, from a high of $1.2 million in the 2009 study.) The bottom 20% of Rhode Island families have seen their incomes rise by 15%, from $8,400 to $9,700.
So what, if anything, should policymakers do based on this information? It depends who you ask.
The liberal Economic Progress Institute says the numbers show Rhode Island needs to do more to shift the state and local tax burden to rich from poor, most notably by adding another income tax bracket to raise more revenue from the highest-earning state residents. They also argue for more redistribution to offset the impact on the poor, for example by making the Earned Income Tax Credit fully refundable.
The conservative Center for Freedom & Prosperity takes a different lesson from these numbers: Rhode Island taxes are too high on everyone, and the best way to deal with that is to cut them, most notably by eliminating the sales tax altogether. “A state that already has a high tax burden should eliminate the tax that harms those on the bottom end,” the group’s Justin Katz wrote on Wednesday.
• Related: Study: RI taxes take most from poorest, least from the top 1% (Jan. 30)