How Rhode Island Revenues Compare - 2017 Edition

Rhode Island Public Expenditures Council

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How Rhode Island Revenues Compare - 2017 Edition

PROVIDENCE R.I. (November 2017) – Today RIPEC released its annual report, How Rhode Island Revenues Compare: 2017 Edition, which provides details on state and local government revenue sources from Fiscal Year (FY) 2015, 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. To see the full report, click here.

Rhode Island continued to have one of the highest tax burdens in the nation in FY 2015, ranking 12th highest per $1,000 of personal income and 13th highest per capita. Among the New England states, Rhode Island’s total tax collections ranked third highest on personal income and fourth highest per capita. Since FY 2005, Rhode Island’s total nominal tax revenues grew by 27.2 percent, compared to 42.6 percent growth nationally. This slower growth has translated into a decrease in Rhode Island’s ranking since FY 2005, when the state had the seventh highest tax burden per $1,000 of personal income and ninth highest on a per capita basis.

Property taxes remained the largest driver of the overall tax burden in the Rhode Island and the New England region, accounting for 43.2 percent of all FY 2015 tax revenues in Rhode Island. By contrast, in the U.S. as a whole, property taxes only accounted for 31.1 percent of total state and local tax revenues.  The state’s property tax burden remained among the highest in the country in FY 2015, ranking fifth highest as a share of personal income and seventh highest per capita. Nominal property tax collections continued to grow in Rhode Island between FY 2005 and FY 2015, increasing by 35.8 percent compared to 45.3 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 2.8 percentage points in Rhode Island, from 40.4 percent in FY 2005 to 43.2 percent in FY 2015.

On other taxes, Rhode Island’s FY 2015 collections were more comparable to the national average. When measured on a per capita basis, Rhode Island’s FY 2015 individual income tax collections were 20th highest in the nation, general sales tax collections were 35th highest and other tax collections were 26th highest. 

In FY 2015, state and local governments in Rhode Island collected approximately $11.7 billion in total nominal revenues, approximately $740 million (5.9 percent) below FY 2014 levels. Total revenues also decreased nationally at a similar rate – state and local governments across the nation collected total nominal revenues of approximately $3.4 trillion in FY 2015, nearly $215.0 million (5.9 percent) less than FY 2014 levels. In both Rhode Island and nationally, a significant factor contributing to the decrease in total revenue collections was the decrease in insurance trust revenue, which declined by 51.7 percent year-over-year in Rhode Island and 54.3 percent in the U.S. as a whole. Within the insurance trust revenue category, employee retirement revenues were reduced by nearly two-thirds (65.5 percent) year-over-year in Rhode Island (from approximately $1.5 billion in FY 2014 to $500 million in FY 2015).  Employee retirement revenues in the nation as a whole also experienced a significant decline, though at a slightly lower rate (60.2 percent) compared to Rhode Island. While the subcategory of unemployment compensation revenues also experienced a nominal decline between FY 2014 and FY 2015 in Rhode Island (14.1 percent) and nationally (15.8 percent), decreased employee retirement revenue accounted for the vast majority of the total decline in insurance trust revenues both locally (96.4 percent) and nationally (97.6 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.  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 3.9 percent of total FY 2015 tax revenues and 8.9 percent of total FY 2015 property tax revenues.  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.”