The Rhode Island Public Expenditure Council (RIPEC) today released a policy brief analyzing proposed legislation that would sharply raise the state’s top income tax rate from 5.99% to 8.99% on income above around $625,000. The proposed 50% increase—targeting the state’s highest earners—would risk negative long-term consequences for state revenues and the economy, threatening business growth, philanthropic activity, and other tax payments associated with the state’s higher income taxpayers, according to RIPEC’s analysis. 
 
“Raising taxes on high earners may sound appealing, but in practice threatens to undermine Rhode Island’s already weak competitive standing,” said RIPEC President & CEO Michael DiBiase. “Rhode Island’s income tax system is already more progressive than most states and state income tax revenues recently have been surging. This proposal is a solution in search of a problem.” 
 
Key Findings Highlighted in the Brief: 
 
Heavy Reliance on Top Earners: In 2022, just 1% of tax filers—those earning $500,000 or more—paid 35% of the state’s total income tax liability. 
 
Tax System Already Progressive: Rhode Island has one of the more progressive income tax structures in the country, ranking 13th by one national metric and 11th by another. 
 
Out of Step with National Trends: Since 2020, 20 states have reduced their top tax rate, including six states that have enacted flat tax structures. As a result, Rhode Island’s income tax ranking on the Tax Foundation’s State Tax Competitiveness Index has been declining (from 25th in 2020 to 30th in 2025). It would have fallen to 44th if this proposal had been in effect. 
 
Impact on Small Businesses: Over half of high-income earners in Rhode Island report business income. Most businesses are structured as pass-through entities, meaning higher personal income taxes directly affect business operations and job creation. 
 
Declining Domestic Migration: Rhode Island already ranks among the worst states in the country for domestic migration. Numerous studies show higher taxes are likely to exacerbate this trend, driving away top earners who contribute significantly not only to tax revenues, but also to local investment, entrepreneurship, and philanthropy. 
 
Income Tax Revenues Have Seen Robust Growth Without a Tax Hike: From FY2019 to FY2025, Rhode Island’s income tax revenues grew at an average annual rate of 6.2%, contributing to robust overall general revenue growth (6.3%) and substantially exceeding inflation (3.7%). 
 
Policy Recommendations 
 
RIPEC urges policymakers to: 
Reject the proposed increase in the top income tax rate 
Pursue reforms that improve the competitiveness of Rhode Island’s income tax  
Focus on policies that support broad-based economic growth 
 
“The data show that Rhode Island’s tax system already places a substantial burden on high earners and small businesses,” DiBiase added. “Rather than raising rates, we should be considering ways to make our tax code more competitive and more supportive of economic growth.” 
 
Read the full policy brief here and the executive summary here.