Re: RI Has 7th Highest Taxes in U.S.
Here are a few more details from the Rhode Island Public Expenditure Council’s annual 50-state tax-revenue comparison. Rhode Island is a top-10 state in terms of income and sales taxes collected whether you measure per-capita or as a percentage of personal income. The full set of New England numbers for this year are…
- (“All State and Local Tax Collections Per $1,000 of Personal Income”, Fiscal Year 2005)
- (4) Maine $133.04
- (6) Vermont $131.91
- (7) Rhode Island $122.68
- (11) Connecticut $119.17
- (34) Massachusetts $107.31
- (49) New Hampshire $91.43
- (“All State and Local Tax Collections Per Capita”, Fiscal Year 2005)
- (2) Connecticut $5,398
- (5) Massachusetts $4,470
- (9) Rhode Island $4,191
- (10) Vermont $4,137
- (13) Maine $3,960
- (29) New Hampshire $3,306
- (“All State and Local Tax Collections, Charges and Misc. General Revenues Per $1,000 of Personal Income”, Fiscal Year 2005)
- (9) Maine 183.69
- (12) Vermont $179.90
- (26) Rhode Island $164.70
- (43) Massachusetts $149.01
- (46) Connecticut $146.12
- (50) New Hampshire $128.87
Carroll Andrew Morse said:
Interestingly, however, Rhode Island does much better nationally when revenues from all sources are considered…
(26) Rhode Island $164.7
So, our property taxes are well above the average but income taxes are about in the middle, sales taxes and fees are low, and overall we’re about in the middle.
Is it just me, or does this go beyond “interesting” to “stunning”? Our taxes/fees etc may still be too high, but this is a much different picture of what is going on than saying we are “7th highest in the nation”
That’s strange. I don’t feel like 26th. I feel anally violated every time I look at my bank account.
Thomas
The reality still is
“Based on the overall state-and-local tax burden, Rhode Island ranks seventh highest nationwide, the study says.”
I’ll bet you could splinter tax collection categories to make RI look good on the average of numerical rankings (we’re no 50 on the aardvark tax) while not changing the overall tax bite one bit.
Looking at CT and MA rankings per capita and per$1K income, it sure looks like “It’s the personal income, stupid!”. Have an environment where you can make more and your rate goes down while per capita collection goes up.
Greg,
I know what you mean, and I feel the same way every other Friday. (Well, not quite like you describe it, but ya know what I mean… 🙂
But as a friend of mine likes to say, “feelings aren’t facts”.
ChuckR,
I agree that you can slice the numbers to show different things. That’s exactly why I think “7th on taxes” is misleading…it’s only a part of the picture.
Isn’t it right to say that only when you take gov’t revenue from *all* sources that you get a true picture of the “burden of government” on the people?
Not arguing really, but asking…
Thomas
What other sources of gov’t revenue would you suggest including and how do you think those would modify RI’s standing in tax burden?
Just curious.
You’re going to have to ask RIPEC at this point. I’m relying on the RIPEC report, table 10 “All State and Local Tax Collections, Charges and Misc. General Revenues Per $1,000 of Personal Income
Fiscal Years 2005 and 1995”, which ranks RI as 26th.
I’ll confess I don’t know the details of what went into final number, but I’m trusting RIPEC here. I do know that we rank 37th in sales tax per $1K income, which has a large effect.
Thomas raises an interesting point, although the comparison would have to be looked at in terms of revenued derived from individual residents.
Local governments in areas of high development like Las Vegas and sun belt states charge developers huge impact fees that go to support infrastructure when new developments are built to accomodate population growth. Florida heavily taxes visitors who go to see Mickey Mouse. Alaska’s government coffers are subsidized by the oil industry.
These are examples of government revenue, but the burden isn’t carried by local taxpayers. Rhode Island doesn’t have the ability to shift taxes the way that some other states do, so the individual taxpayers get the bill.
Thanks Anthony
Looking at the 50 State Tax-Revenue Comparison document, we can see that. Alaska and Texas oil and gas severance taxes allow them to live fat with little pain. Can’t do that with quahogs.
Thomas
If RI is 7 in personal tax burden and 26 in all tax collections, I suspect the difference is in business taxes. The progressive approach to increase business taxes, but given RI’s dire straits, thats a death spiral inducing move. You can’t tax businesses that aren’t here and you can’t attract them if all you have in mind is taxing them. I think the whole story IS that personal tax burdens are high because there’s no alternatives. (Unless the AG can mug some more corporations – fast food/obesity tie-in, anyone?)
they arent high enough according to some people
>>I’ll confess I don’t know the details of what went into final number, but I’m trusting RIPEC here. I do know that we rank 37th in sales tax per $1K income, which has a large effect.
Don’t forget that RI’s sales tax collections are artificially driven down.
RI’s sales tax rate is 40% higher than is MA’s, and many many Rhode Islanders hop over the border to do their shopping and gas up their cars (MA’s gas tax is lower too).
I know of some people who on principle try to shop in MA as much as possible, taking satisfaction in depriving the corruption machine on Smith Hill of some of the tax-revenue fuel that it depends on to operate.
Anthony and ChuckR,
I was lucky enough to get ahold of Gary Sasse of RIPEC, to ask about the relation between the #7 ranking and the #26 ranking.
He pointed me to a RIPEC document. I could not find it on the RIPEC website, but a copy is at downloads.heartland.org/08754r.pdf
The difference has to do with what is counted and what is not, but there is nothing to indicate that it is related to business taxes.
RIPEC’s #7 ranking comes only from taxes, which are regarded as mandatory. The #26 ranking comes from including “fees” and “charges”, which include such things as zoo admissions, drivers licences, auto tags, and so on which are “voluntary”.
Obviously, we could debate whether it’s really right to call all of these fees voluntary, and whether or not they should be counted in determining the costs of government. RIPEC’s document admits there are differences of opinion on what should be counted, but they side with the methodology that puts RI at #7. I would like to know more, as it seems it would require huge amounts of fees to move RI from 7 to 26, but haven’t had time to sort this out. Nonetheless, I thought this information might be useful in the meantime.
Anybody who wants to spend more time than I have with the RIPEC document is welcome to do so 🙂
Dear Tom W,
Funny, Massachusetts doesn’t report the same thing. There is no higher spikes in tax revenue collected in border towns. Perhaps your friends are pulling your leg just to arc you.
What’s more bothersome is once again, we have a bunch of numbers without perspective. “7” is only meaningful if by structure you should be “30” or so. On the otherhand, due to your size, no child left behind status and homeland security committment, if you are supposed to be “2”, 7 is good news. Problem is we don’t know since you’re all hooked up on 7.
Of course, the silly RIGOP will try to make a message out of this and fail predictably. By the way, it’s been 5 weeks, where’s the 1000 worker plan?? If it were that easy, shouldn’t a plan be on the table by now?? Maybe Commander General Gio was a tad irresponsible. Then again, he obviously learned that trait from the Governor who hasn’t filed the original plan.
Dear Tom W,
Funny, Massachusetts doesn’t report the same thing. There is no higher spikes in tax revenue collected in border towns. Perhaps your friends are pulling your leg just to arc you.
What’s more bothersome is once again, we have a bunch of numbers without perspective. “7” is only meaningful if by structure you should be “30” or so. On the otherhand, due to your size, no child left behind status and homeland security committment, if you are supposed to be “2”, 7 is good news. Problem is we don’t know since you’re all hooked up on 7.
Of course, the silly RIGOP will try to make a message out of this and fail predictably. By the way, it’s been 5 weeks, where’s the 1000 worker plan?? If it were that easy, shouldn’t a plan be on the table by now?? Maybe Commander General Gio was a tad irresponsible. Then again, he obviously learned that trait from the Governor who hasn’t filed the original plan.
Tom W. Now you know two people. The last 4 vehicles our family has purchased have come from MA. The appliances for our new house came from CT. Starve the beast.
Thomas
Thanks for the link. Thats what I get for assuming…..
Thats a heck of a lot of voluntary fees though.
Bobby has a good point about the numbers. Also, rankings may not say much in any case. If the difference between #1 and #50 is 1%, it doesn’t matter much if you are first, last or in the middle.
I can’t say I fully agree with RIPEC’s way of counting things. With their method we could improve our rankings by lowering income taxes and doubling vehicle registration fees. Or we could build toll roads instead of taxing to build roads. I know people who would approve on the grounds that user fees are more fair than taxes, but I can’t see that there’s much difference beyond the accounting.
Dear WJF,
Did you file the appropriate tax form after doing so??
If not, are you know denying the necessity for the rule of law in a civilized society?
If you didn’t, since you made your neighbors pay more, how are you different than the average welfare cheat who steals from their neighbors??
Bobby O said
“On the otherhand, due to your size, no child left behind status and homeland security committment…” Only WY, NY, HI, ME, AK and VT are ahead of RI in tax burden. Do you really think that the other 42 states have lower obligations re NCLB and Homeland Security? This explanation doesn’t cut it. Why not say we should be 22 and we’re 7? Why say we should be 2 and we’re 7?
BobbyO,
The relevant numbers are #7 in tax burden, #9 in terms of school spending (acceptable variance with the #7) and middle-of-the pack in educational performance (unacceptable variance with a #7 or a #9).
Until we get to top-10 performance for our top-10 taxing and spending on education, putting more money into the existing underperforming structure is a non-starter.
Dear Andrew,
Study after study tells us that some districts just have to spend more than others. The more heterogeneous you are, the more you must spend.
Chuck,
I said I didn’t know. You don’t know either. The one weird one on that list is Wyoming. Then again, much like us, that could be a population deal.
How soon we all forget the role utilities and the marketplace play in all of this.
OK, I know I’ve hit my limit of comments on this post, but I can’t resist one more, as I just noticed something related to the state rankings.
Even if you use RIPEC’s numbers putting us at rank 7 (which I question above), I’m not sure how bad this is, relatively speaking.
RIPEC gives a RI tax burden of $122.68.
The average state has a burden of $112.84
If you make $50K/year, the difference is $6134-$5642= $492.
Would that savings of $492 entice you to switch states? Would you turn down a job in RI over that amount?
If you made $100K, would the savings of $984 affect your choice?
thomas ,
great points…. lets try doubling taxes. we can nickel and dime everyone to death and only a few will leave the state.
great strategy.
one more thng , do you ever shop around to save a few dollars on things , or buy things on sale, gee , why bother,,, its only a few bucks,,,,
incredibly lame , socialistic philosophy
Thomas, thanks for the info. from RIPEC.
I’m still not sure whether or not that accounts for the difference between government revenue generated by residents versus non-residents, though.
While there may seem to be only a few hundred dollars of difference between the total tax burdens in MA and RI, the reality is that those taxes that are higher have an impact.
On the personal income tax side, it matters less for the middle class than the wealthy when the differnce adds up. But it’s mainly the lower and middle classes that will take advantage of the lower sales tax in MA.
However, the article seems to make is sound like the root cause is property taxes and RI has seen some heavy increases in property taxes, particularly in places like Cranston.
With the recent report on municipal pension liability, more Cranston-style increases may be repeated elsewhere.
While you can say it’s only a $500 difference between MA and RI, the higher level of property taxes lead prospective homeowners to purchase homes in MA. A $500 per year tax difference adds up over time for a working class family, particularly when jobs in MA pay more than they do in RI, which they often do.
There is a valid point that people often don’t take into account the $1,000 in T fares or tolls that they’ll have to pay if they’re commuting into Boston for work, but the fact is they don’t consider it when making a decision on where to live.
Ultimately, population and/or tax base growth/reduction are the best indicators of whether tax revenues are providing people with desired services or whether the people think taxes are excessive.
BobbyO,
That assumes that the only way to run things is through top-down bureaucracies, which are notoriously bad at allocating resources.
Thomas,
1) Because of the progressivity of the income tax, I don’t think a straight per-capita calculation reflects the full change for people who actually pay the tax.
JohnnyPaycheck,
There was no “incredibly lame socialistic philosophy” in my comment. There was no philosophy at all. I simply presented some facts, and asked a couple of questions. Everybody gets excited that we are #7. Before I do that, I want to know “what does that mean in real terms?” and “How was that measured?”
The answers seem to be that A) under RIPEC’s preferred measure, we tax roughly $10 per $1000 more than the average state, which comes out (roughly, as Andrew notes) to $500 for a $50K income and B) RIPEC measured it one way, but they admit that reasonable people can disagree, and even present an alternative measure in their report that places RI at 26th in the nation. There’s no philosophy here, just facts.
Speaking of reasonable people, I have been pleased to find that this blog seems to have more than some other blogs. I’ve found people who are actually interested in learning something they don’t know (as I am) and who can talk respectfully to those they disagree with. I hope I wasn’t wrong.
If we want to shake up the power structure in RI (I do), and regardless of whether you’re focused on the General Assembly Leadership or the Governor or both (I’m not too fond of either), then it’s probably time for us to stop throwing labels and insults at one other, educate ourselves and arm ourselves with facts and arguments.
That means being willing to listen to the other side. We may have more in common than we think. Only the politicians benefit from us being at each others’ throats, because it distracts us from watching them closely.
Andrew said:
1) Because of the progressivity of the income tax, I don’t think a straight per-capita calculation reflects the full change for people who actually pay the tax.
Well, it’s not per-capita, but per $1k of income (which is a better measure)
But I agree…RIPEC’s figure is an average cost across all income levels so it doesn’t reflect the progressivity of the income tax and we can’t say too much about specific groups at different income levels.
Thomas
The problem with looking at differences in average taxes per $1k income is that progress in business and job creation is made by the people at the extreme end of the income/wealth scale. You can argue and I would agree that the family pulling in $1 million does not need that extra $10000 net income. (Due to progressivity at the underlying Federal level, I’ll bet its much greater than that scaled up average number). But by the simple expedient of moving to either CT or MA, they can have that money and not suffer any perceived loss of gov’t services. What’s actually worse is estate tax exemption. Having recently worked on my father’s estate I know that even that tax hell New York has a substantially higher exemption, as does MA. So you, a person of means, will pay more now and pay more later. Your potential employees also pay more now and (with the price of housing driving many estate valuations) they also will pay more later. And then there is the moral hazard of underfunded pensions. Somebody will have to pay for them and that will be people with the means to do so, unless they move out of this county sized state.
ChuckR,
Well, yes. It gets more complicated the deeper you go.
As for progressivity, for instance, if we were going to get into the details, we would have to add that RIPEC reports that the lowest 20% of earners pays 13% of thier income in state and local taxes (after federal offsets) while the top 20% pays only 6%. That’s not progressive by any standard I know.
We would also have to mention that RI’s capital gains is now on it’s way to zero, while MA is at 5%.
Really, though, I was only trying to suggest that “7th in the nation..it’s terrible!” is an over-simplification, not to address the entire tax structure.
Your points about estate taxes and pensions are well-taken.
cheers-Thomas
Forbes (www.forbes.com) released its 2007 rankings of the Best States for Business.
RI ranks 45th, dropping two spots from 43rd in 2006.
The top 10 states are:
1. Virginia
2. Utah
3. North Carolina
4. Texas
5. Washington (state, not DC)
6. Idaho
7. Florida
9. North Dakota
10. Minnesota
RI is ahead of only Louisiana, West Virginia, Alaska, Maine and Michigan.
The highest ranked New England state is NH at #14.
Oops. Minor correction to my comment immediately above. According to RIPEC:
The top ONE percent pays 6% of it’s income in taxes
The next 4% pays 7.3%
The next 15% pays 8.7% of it’s income.
The middle 20% pays 10.3%
The bottom 20% pays 13% of it’s income in taxes.
The main point is the same. Our overall tax system (on which our #7 ranking is based) is not progressive, but regressive.
Dear Andrew,
We don’t have an argument on that point in the general.
However, in the specific, NCLB works the way it does.
Posted by Thomas at July 11, 2007 1:45 PM
We would also have to mention that RI’s capital gains is now on it’s way to zero, while MA is at 5%.
XXX
You have too much faith in the GA. I predict capital gains is headed to 5% next year-if not 9.9%
Mike,
I’d be grateful to know the basis of your prediction. I was in the gallery at the G.A. on June 15, when David Segal proposed holding Cap. Gains taxes steady to provide the missing 3% education increase from the Governor’s budget. I don’t recall the exact vote, but it was very, very lopsided.