Study: RI taxes take most from poorest, least from the top 1%

January 30th, 2013 at 12:01 am by under Nesi's Notes, On the Main Site

The Institute on Taxation and Economic Policy is out with its latest look at how much of their incomes different Rhode Islanders pay in state and local taxes, and the big headline hasn’t changed: the state’s tax structure takes almost twice as much from the poorest 20% of residents as it does from the top 1%.

Rhode Island families making less than $18,000 a year will pay 12.1% of their 2010 income in state and local taxes under current law, according to the study by ITEP, a Washington-based research group that is affiliated with the labor-backed nonprofit Citizens for Tax Justice.

At the other end of the spectrum, Rhode Island families making $378,000 or more a year will pay 6.4% of their 2010 income in state and local taxes when the federal deduction for those taxes is taken into account. An analysis by WPRI.com of ITEP’s reports shows that since 2002, state and local taxes have gone up or stayed steady for the top 60% of taxpayers while decreasing slightly for the bottom 40%:

(The 2010 income for the lowest 20% was less than $16,000; for second 20%, $16,000-$27,000; for middle 20%, $27,000-$42,000; for fourth 20%, $42,000-$72,000; for the next 15%, $72,000-$141,000; for the next 4%, $141,000-$328,000; and for the top 1%, $328,000 or more.)

Rhode Island is among 10 states that levy the highest taxes on the poor and is the only New England state in that group, according to the study. It is also one of only three states in the U.S. where the Earned Income Tax Credit isn’t fully refundable, which means Rhode Island families with no income tax liability cannot receive the benefit of the credit, the study says.

However, the study praised Rhode Island for some changes its made to its tax code in recent years: eliminating all federal itemized tax deductions; phasing out the benefit of its standard tax deduction and personal exemption for wealthier residents; increasing both the standard deduction and personal exemption; and taking “small steps” toward expanding its sales tax base to cover more services and exempt goods.

The three major types of taxes levied on households by state and local government in Rhode Island – sales and excise taxes, personal income taxes, and property taxes – hit different residents at different rates, with sales taxes taking a particularly large chunk of poorer residents’ incomes and the income tax hitting wealthier residents hardest:

Like most states in the region, Rhode Island continues to be heavily dependent on the property tax, which provided 32% of all state and local tax revenue in fiscal 2010 compared with 30% in fiscal 2000. On the other hand, the study says Rhode Island still taxes far fewer services than most states:

Of course, the ITEP study isn’t a full picture of what families pay in taxes: it doesn’t look at federal income and payroll taxes, the former of which is progressive and would increase the bill for wealthier Rhode Islanders. But it’s an interesting look at how the state- and local-level tax regime burdens different people.

• Related: Charts: Regressive RI taxes getting (slightly) more progressive​ (Jan. 30)

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14 Responses to “Study: RI taxes take most from poorest, least from the top 1%”

  1. Bob says:

    “…study by ITEP, a Washington-based research group that is affiliated with the labor-backed nonprofit Citizens for Tax Justice”
    union study- can’t be trusted.

    1. Cosmo says:

      You got that right.

  2. Mr. Fish says:

    Hey, am I the only one wondering why Ted Nesi doesn’t put caveats around Tax Foundation reports?

  3. [...] the entire report here. Or read the Kathy Gregg’s front page ProJo here and Ted Nesi’s blog post here. Nesi and Gregg are Rhode Island’s two most influential journalists, and influential [...]

  4. Cosmo says:

    I’d like to see the comparison in absolute dollars rather than percentages. I’ll be the higher income people pay a LOT more in absolute dollars. And how about lowering the taxes in this sewer.

    1. Mr. Fish says:

      i bet you would…it sure would distort the argument….

      1. Cosmo says:

        No, expressing it in percentages distorts the argument. Somebody making half the money that I do still uses the same public services that I use, but I get to pay much more money for the those services then get to listen to the whining that I pay a lower percentage of my income. Up to a point I don’t mind but at some point its time for people to take responsibility for their own life and career decisions and get their hand out of my wallet. And in case you haven’t noticed, this sewer isn’t exactly an economic powerhouse and taxes have a lot to do with that.

    2. Basics says:

      Cosmo, you’re missing the whole point of the study. Obviously a person who makes $300,000 will be paying more in terms of total dollars than a person making $20,000. The study illustrates that it will not have as detrimental an effect on the average “rich guy” as opposed to the average “poor guy”.

      In layman’s terms, (because apparently this concept is difficult for you to comprehend): If I make $1.00 and am taxed 12%, I owe 12 cents. If I make $15.00 and am taxed 6%, I owe 90 cents. After paying taxes on my %1.00, I now have only 88 cents left to spend. After paying taxes on my $15.00, I still have $14.10 to spend.

      Now do you see why the tax code in RI it hits the less fortunate a whole lot harder than the rich? It’s not about the total dollars one is taxed, it’s how much of their total income one is taxed. Can you imagine Bill Gates wanting to switch places with a mechanic because he’s paying more total dollars in taxes? I think not…

      1. Cosmo says:

        Basic, you should devote more time to improving your reasoning skills and less on your sarcasm. An insult is not a reasoned argument. But I feel like lowering myself to the level of the average Rhode Islander today so here goes. I understand the point of the study quite well and I’m sure it will provide lots of ammunition for the legions of whining losers in Rhode Island. Let me help you by putting my argument simply for you. If you pay 12 cents and I pay 90 cents, I’m paying 7.5 times as much tax as you for the same public services. The fact that you only have 88 cents left to spend and I have $14.10 is for the most part a function of our life decisions good or bad. But the good part for you is that I’m going to use that extra income to open my own business and employee people out of the goodness of my heart…NOT…actually to make more money. But people will have jobs anyway, aren’t I a nice guy?

      2. Basics says:

        Cosmo, I think the only one whining about an objectively unfair tax code seems to be you. However, you sound like a stand-up individual, so I’ll try to dumb it down even more, just in case lowering yourself to the average Rhode Islander was a bit more trying than you had anticipated. Yes, you are paying 7.5 times as much in real dollars, yet that still isn’t a sensible argument to make for keeping the tax code the same in this state.

        Hypothetically, if the tax rate were the same, say 9%, everyone would essentially be paying their fare share. Still, by your reasoning, it seems you would have a problem with paying this amount, simply because it would be more for you in terms of real dollars (despite the fact that it’s a flat rate for everyone). So, how else could one change the tax code? Going back to our original example, if we had those making $1.00 taxed at the same amount of dollars as the rich, they would be paying 90% of what they make in a year, with only 10 cents left. This is obviously problematic. And if the rich were taxed the same amount of dollars as the poor, they would walk away with nearly their entire amount of income still untouched. This is also obviously problematic. And this is the reason this state’s and this country’s economy has continued to worsen- because the inequality gap remains so shockingly large. Of course, if you’d prefer to attempt and recreate the fiscal years from 2000-2008, I suppose that can’t hurt…

        I still don’t know which is sadder: the fact that you’re aware of this gross inequality and want to perpetuate it, or the fact that you still don’t understand what the difference between this %, and this, $ means.

    3. Mario says:

      I’d rather see a comparison that uses earned income, rather than simply lumping together all types. Holding earned income as equivalent to interest and capital gains is a political position that shades the results of the study.

  5. Jim says:

    But don’t they (the lowest income) get the biggest tax credit federal and state

  6. [...] Related: Study: RI taxes take most from poorest, least from the top 1% (Jan. 30) Tags: citizens for tax justice, economics, economy, institute on taxation and economic [...]

  7. Max D. says:

    Basics,

    The only thing you have demonstrated is that your an elitist liberal who talks down to people. The fact is it’s the sales tax that’s regressive and if we eliminate it then where’s the problem. Oh, that’s right how do we replace that money so we can maintain our bloated state government? The fact is, unlike the money handed down by the federal government, eliminating the sales tax will create economic growth. Economic growth equals jobs. More jobs equals more revenue for the bloated government. When Massachusetts cuts their sales tax to 4.5 percent as planned, people will be running across the border to shop. Your answer will again be tax the rich more and then more again.