Note To GoLocalProv: RI “Rich Pay Less In Income Tax” = Third Highest Income Tax Rate In Country

GoLocalProv’s Dan Lawlor has a column today in which he attempts to causatively link Rhode Island’s top income tax rate to our unemployment rate.

In 1997, during a boom economy in RI- remember the Renaissance? – the top income earners had a 27.5% income tax rate. Our jobless rate was 5.3%.

Ah, but then, in 2010, according to Dan, we hit the skids, both in unemployment and top tax rate-wise.

In 2010, the General Assembly and Governor Carcieri reduced the top income tax rate from 9.9% to 5.99%. The state’s sales tax remained at 7%. Our unemployment rate was 11.6%.

Uh huh. Two years later?

Top income earners now pay 5.99% in income taxes. Our jobless rate is 10.8%.

And the conclusion (according to Dan)?

Our tax policy has basically been that the rich pay less in income tax, and we all pay more in property and sales tax.

We could at this point ask if perhaps ALL of Rhode Island’s taxes aren’t too high and if this situation isn’t most likely a direct result of too much spending on the state and local level. But we’ll stick to what Dan wrote, only, if it’s okay with Dan, we’re going to overlay some context, a.k.a., facts.
By the way, H/T RIGOP StrikeForce Co-Chair Mike Napolitano for highlighting this column. About the 27.5% income tax rate of the 1990’s, Mike points out in comments under Dan’s column that Rhode Island’s income tax was calculated quite differently than it is today.

In fact, that rate was not based on the taxpayer’s income but on the taxpayer’s entire federal income tax liability. In other words if a taxpayer paid $100 in federal income tax they in turn paid $27.50 to the state of Rhode Island. The rate was piggybacked on to the federal rate and not on their wages.

So comparing 1997’s 27.5% income tax rate to today’s 5.99% rate is not valid at all because the former was a piggy back rate. (Imagine a state income tax that was 27.5% of your income. By the second year of such a rate, Rhode Island literally would no longer exist as a state.)
Now, with regard to Rhode Island’s current top income tax rate of 5.99%, let’s mosey on over to the Tax Foundation and click on the Rhode Island page.

Rhode Island’s personal income tax system consists of three brackets and a top rate of 5.99%, kicking in at an income level of $129,900. Rhode Island’s income tax system closely adheres to the federal income tax code. Among states levying personal income taxes, Rhode Island’s top rate of 5.99% is the 3rd highest nationally.

Follow up question for Dan. Under his theory, how much higher would we have to make Rhode Island’s top income tax for unemployment to start going back down? Obviously, it would have to go from number three nationally to number one. But by how much would we have to overshoot the current highest rate to get back to a decent unemployment rate?
Off topic ADDENDUM: To prove that I am not merely out to pick on GoLocalProv with this post, permit me to direct you to their very good story today about the star of that video released Saturday by the ProJo.

The man seen in an undercover video telling a campaign staffer for Congressional candidate Anthony Gemma that he could deliver mail ballot votes in exchange for $500 per week received a $103,000 taxpayer-funded loan for a restaurant from the city of Providence in 2004, GoLocalProv has learned.

Remember that Mr. Ramirez allegedly secured mail ballots for the David Cicilline campaign in a prior election. Now, who was mayor of Providence in 2004 when Mr. Ramirez’ business secured this loan and who might have been feeling grateful for Mr. Ramirez’ assistance to his campaign? Gosh, I’m trying to think

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Tommy Cranston
Tommy Cranston
10 years ago

“(Imagine a state income tax that was 27.5% of your income.”
Don’t have to imagine it. If Jerry Brown’s tax hike referendum in Mexifornia passes in November the state income tax will go to a Stalinistic 13.3%.
Getting there…

David C
David C
10 years ago

Yes, the 27.5% rate cited in that Golocal article was embarrassingly wrong.
Those were the days when the RI income tax return was about five lines long — I miss it.

Justin Katz
Justin Katz
10 years ago

Nevermind the embarrassingly wrong devotion to correlation equaling causation.

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