RHODE ISLAND'S OVERALL TAX BURDEN DECLINES RIPEC RELEASES FY 1996 "TAX AND SPENDING DATA BOOK"

>>Tax and Spending Data Book 1999 Overview

According to U.S. Census Bureau data compiled by the Rhode Island Public Expenditure Council (RIPEC), State and local taxes in Rhode Island declined as a percentage of personal income during FY 1996, taking 11.5 percent of income compared to 12.0 percent just one year earlier. While changes over the course of one year do not establish a trend, the 1999 edition of the Tax and Spending Data Book: How Rhode Island Compares shows that Rhode Islandís relative tax burden fell from 14th highest in the U.S. in FY 1995 to 20th in FY 1996. Total government expenditures per $1,000 of personal income also declined from 14th to 20th highest.

From FY 1995 to FY 1996, average personal income in Rhode Island climbed 7.9 percent, above the national growth rate of 6.9 percent, placing the State 12th highest in per capita personal income growth. State and local government expenditures fell 2.0 percent, while total revenues increased 1.3 percent. This compares to a nationwide increase in expenditures of 3.4 percent and an increase in revenues of 6.7 percent.

As a result of these circumstances, Rhode Islandís ranking compared to other states changed within several tax and spending categories in relation to the Stateís FY 1995 ranking, particularly in terms of the Stateís rankings per $1,000 of personal income.
State and Local Tax Burden Table 1 on the following page provides a summary of Rhode Island State and local government revenue collections compared to the United States average on a per capita and per $1,000 of personal income basis.

In Rhode Island 11.5 percent of personal income was collected by State and local taxes compared to the national average of 11.3 percent. Rhode Island ranked 20th highest among the 50 states in the percentage of personal income collected by state and local governments. The Ocean Stateís ranking is an improvement from 14th place in FY 1995, at which time State and local taxes collected represented 12.0 percent of personal income.

Rhode Island's total tax collections were $114.85 per $1,000 of personal income, 1.6 percent above the national average of $112.99. This placed Rhode Island 20th highest, a drop from 14th place in FY 1995 ($120.39 per $1,000 of personal income).

On a per capita basis, State and local taxes in Rhode Island were $2,738. This amount was 5.4 percent above the national average of $2,597 ñ ranking Rhode Island 13th highest among the 50 states, down from 12th highest in FY 1995 ($2,660 per capita).

Property Taxes

Rhode Islandís property tax collections were $48.75 per $1,000 of personal income. This was 41.9 percent above the national average of $34.35, placing Rhode Island 5th highest.

On a per capita basis, Rhode Islandís property tax collections were $1,162. This was 47.3 percent above the national average of $789, making Rhode Island 5th highest among the 50 states. Both of these rankings remained unchanged from FY 1995.

Individual Income Taxes

Rhode Islandís individual income tax collections were $24.60 per $1,000 of personal income. This was 2.2 percent above the national average of $24.08, placing Rhode Island 28th highest among the 43 states that collect a personal income tax. The State ranked 29th in FY 1995.

On a per capita basis, Rhode Islandís individual income tax collections were $586. This was 5.8 percent above the national average of $554, making Rhode Island 20th highest compared to 21st in FY 1995.

General Sales Taxes

Rhode Island's general sales tax collections were $19.71 per $1,000 of personal income. This was 28.9 percent below the national average of $27.73, placing Rhode Island 40th highest among the 46 states that have a general sales tax.

On a per capita basis, Rhode Islandís general sales tax collections were $470. This was 26.2 percent below the national average of $637, making Rhode Island 39th highest. Both of the Ocean Stateís general sales tax rankings were unchanged from FY 1995.

State and Local Expenditures

The Data Book also provides information on expenditures by Rhode Island State and local governments and how these spending levels compare to the other 49 States. Table 2 on the following page highlights expenditures by major function for Rhode Island and the United States per $1,000 of personal income and per capita.

State and local spending per $1,000 of personal income in Rhode Island totaled $236.51. This exceeded the national average of $229.20 by 3.2 percent. The Ocean State ranked 20th in State and local government spending per $1,000 of personal income, compared to a ranking of 14th in FY 1995 when State and local government spending was $260.44 per $1,000 of personal income.

State and local government spending as measured on a per capita basis totaled $5,638 in Rhode Island. Using this measure, Rhode Islandís spending was 13th highest among the 50 states and 7.0 percent above the national average of $5,268. In FY 1995 State and local governments spent $5,755 per capita, placing Rhode Island 10th in the U.S.

The Data Book is an annual RIPEC publication that presents a state-by-state comparison of all sources of state and local government revenues, including income, sales and property taxes, Federal funds, and non-tax resources. The publication also compares Rhode Island governmentsí spending for all major activities, ranging from elementary and secondary education to police and fire protection to public welfare. The information in the Data Book is for fiscal year 1996, the most recent year for which comparative national data is available.

To provide a common basis for comparison, the publication measures state and local revenues and expenditures per capita and per $1,000 of personal income. This provides two types of common measurements that account for differences due to the population of the state (per capita) and the average personal income level of the state (per $1,000 of personal income). Comparing tax burdens based on per capita and per $1,000 of personal income are two ways to measure the impact of a particular tax or group of taxes. One may also compare effective tax rates or use taxpayer profiles to measure tax burdens. Each of these measures is useful, but all have their limitations.