From projo.com
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Rhode Island news
8.5.2001 00:05
R.I. ranks 14th in U.S. in state, local taxes
• Despite the perception among Rhode Islanders that their taxes are extraordinarily high, other states in the region with higher tax burdens include Maine, New York, Connecticut and Vermont.
BY SCOTT MacKAY
Journal Staff Writer
PROVIDENCE
-- Rhode Islanders love to grouse about how high their state and local taxes are when compared with other states. But the latest figures from Census 2000 show that while the tax burden here is higher than in many other parts of the United States, it is actually lower than in such Northeastern states as Connecticut, Maine, New York and New Jersey.
When state and local tax burdens are measured on a per-person basis, Rhode Island ranks 12th among the 50 states.
When the measure is the percentage of personal income that residents pay for local and state taxes, Rhode Island ranks 14th among the 50 states. Other states in the region with higher tax burdens include Maine, New York, Connecticut and Vermont.
Most economists consider the personal income method a more valid basis for comparison, says Leonard Lardaro, a University of Rhode Island economics professor.
All of the information is from 1998, the latest year for which figures are available.
Massachusetts and Rhode Island are fairly close in relative tax burdens.
Massachusetts taxpayers pay 5.6 percent of their income in state income taxes, regardless of how much they earn. Rhode Island's state income tax is based on a taxpayer's federal tax liability. The Massachusetts system hits lower- and middle-income taxpayers harder than Rhode Island's, so per capita state income tax payments are higher in the Bay State than the Ocean State. And Massachusetts taxpayers have higher average incomes.
Thus, on a per capita basis, Rhode Islanders pay $745 annually in state income levies, while Massachusetts taxpayers pay $1,307, according to Gary S. Sasse, executive director of the Rhode Island Public Expenditure Council, a business-financed government research group.
But when other taxes, such as sales and property taxes, are figured in, the average Massachusetts taxpayer pays a bit less in total state and local taxes -- 11.3 percent of personal income, compared with 11.7 percent in Rhode Island. That works out to a Massachusetts taxpayer paying $3.87 a year less per $1,000 in income than his or her Rhode Island counterpart.
THE JOURNAL ANALYSIS of census figures included every local tax, including real estate and auto taxes, cigarette and liquor taxes, sales and income levies, public utility taxes and such splinter taxes as motor vehicle fees.
"In any state, you can find good and bad features in the tax system . . . and ours is a mixed bag," says Sasse.
For example, he says, on income and sales taxes, Rhode Islanders have relatively low tax burdens compared with residents of other states. But on property taxes, Rhode Islanders pay more than residents of all but five other states.
Rhode Island compares favorably, Sasse says, with some northeastern neighbors and with states that have generous social service programs. Part of this is due to demographics; Rhode Island has the highest percentage of elderly residents in New England and the sixth highest in the United States. Nearly 1 in 7 Rhode Islanders is 65 or older.
Many older residents are past their earning years but cost the state a lot in Medicaid payments for nursing home care. And other generous state programs, such as the Rite Care children's health insurance initiative, have increased state spending on social programs.
As a result, Rhode Island has the enviable record of having the lowest percentage of children without health insurance of any state. But there is a cost, says Lardaro, the URI economist.
"I'm proud that we do RiteCare, but they probably should have studied it a little more closely than they did because there is going to be more of a demand for those services as the economy gets worse," says Lardaro.
Lardaro predicted that the state will have to increase co-payments for RiteCare and enact some restrictions on the low-income families who benefit from the program.
In Rhode Island, the two major taxes that support state government -- the sales and income levies -- have either decreased or remained stable since Governor Almond took office in 1993. The state's income tax has dropped from 27.5 percent of a taxpayer's federal income tax liability to the 25 percent figure that becomes effective in January.
REP. ANTONIO PIRES is a Pawtucket Democrat who chairs the House Finance Committee, which oversees tax and spending issues in the General Assembly. Pires said he and other Assembly leaders were "well aware" of Rhode Island's overreliance on property taxes in recent years when they approved state financial policies.
When the figures for 2000 and 2001 become available, Pires predicted last week, Rhode Island's tax burden will drop relative to other states.
"We are clearly moving in the right direction," said Pires. "Our whole plan has been based on getting property taxes down, which is why we went after the auto tax."
The state is on track to phase out car taxes by 2007 and the business inventory tax by 2009. In addition, the state's capital gains tax on assets held for at least five years is due to expire in 2008.
Still, Rhode Island ranks very high -- sixth in the country -- in reliance on property taxes. This dubious distinction has gotten worse in recent years; the state ranked 10th in this measure a decade ago.
The main reason, says Sasse, is because Rhode Island relies more heavily on property taxes to finance schools than most other states.
"We haven't gained control over school spending," says Sasse. "Until we do, property taxes are going to continue to escalate."
Sasse also said that an economic downturn will force legislators and Almond to put the brakes on state spending, which has increased sharply in recent years.
"There are clearly some clouds on the horizon and some hard choices to be made. If you worry about controlling spending, you won't have to worry about raising taxes," said Sasse.
Lardaro also said he believes the state's 7 percent sales tax is a bigger thorn in the side of business than the figures show. "The sales tax doesn't show up in glaring statistics, but every company that expands or locates here seems to want a sales-tax exemption."
Rhode Island has held up about as well as most other states in dealing with the slow economy, says Sasse. According to the Index of State Economic Momentum, Rhode Island ranked 27th among the 50 states in the second quarter of 2001. The index measures income growth, population growth and employment growth.
Rhode Island did well, Sasse said, in personal income growth, ranking 14th among the 50 states, with average income up 6.6 percent between May 2000 and May 2001. The state did not do so well in creating new jobs in that period, ranking 34th nationally, with a .6 percent increase in jobs.
With computer-assisted reporting by Ariel Sabar
Digital Extra:
Review Journal coverage of Census 2000 with stories, maps, charts and additional Web resources at:
http://projo.com/news/census/
R.I. ranks 14th in U.S. in state, local taxes
• Despite the perception among Rhode Islanders that their taxes are extraordinarily high, other states in the region with higher tax burdens include Maine, New York, Connecticut and Vermont.
BY SCOTT MacKAY
Journal Staff Writer
When state and local tax burdens are measured on a per-person basis, Rhode Island ranks 12th among the 50 states.
When the measure is the percentage of personal income that residents pay for local and state taxes, Rhode Island ranks 14th among the 50 states. Other states in the region with higher tax burdens include Maine, New York, Connecticut and Vermont.
Most economists consider the personal income method a more valid basis for comparison, says Leonard Lardaro, a University of Rhode Island economics professor.
All of the information is from 1998, the latest year for which figures are available.
Massachusetts and Rhode Island are fairly close in relative tax burdens.
Massachusetts taxpayers pay 5.6 percent of their income in state income taxes, regardless of how much they earn. Rhode Island's state income tax is based on a taxpayer's federal tax liability. The Massachusetts system hits lower- and middle-income taxpayers harder than Rhode Island's, so per capita state income tax payments are higher in the Bay State than the Ocean State. And Massachusetts taxpayers have higher average incomes.
Thus, on a per capita basis, Rhode Islanders pay $745 annually in state income levies, while Massachusetts taxpayers pay $1,307, according to Gary S. Sasse, executive director of the Rhode Island Public Expenditure Council, a business-financed government research group.
But when other taxes, such as sales and property taxes, are figured in, the average Massachusetts taxpayer pays a bit less in total state and local taxes -- 11.3 percent of personal income, compared with 11.7 percent in Rhode Island. That works out to a Massachusetts taxpayer paying $3.87 a year less per $1,000 in income than his or her Rhode Island counterpart.
THE JOURNAL ANALYSIS of census figures included every local tax, including real estate and auto taxes, cigarette and liquor taxes, sales and income levies, public utility taxes and such splinter taxes as motor vehicle fees.
"In any state, you can find good and bad features in the tax system . . . and ours is a mixed bag," says Sasse.
For example, he says, on income and sales taxes, Rhode Islanders have relatively low tax burdens compared with residents of other states. But on property taxes, Rhode Islanders pay more than residents of all but five other states.
Rhode Island compares favorably, Sasse says, with some northeastern neighbors and with states that have generous social service programs. Part of this is due to demographics; Rhode Island has the highest percentage of elderly residents in New England and the sixth highest in the United States. Nearly 1 in 7 Rhode Islanders is 65 or older.
Many older residents are past their earning years but cost the state a lot in Medicaid payments for nursing home care. And other generous state programs, such as the Rite Care children's health insurance initiative, have increased state spending on social programs.
As a result, Rhode Island has the enviable record of having the lowest percentage of children without health insurance of any state. But there is a cost, says Lardaro, the URI economist.
"I'm proud that we do RiteCare, but they probably should have studied it a little more closely than they did because there is going to be more of a demand for those services as the economy gets worse," says Lardaro.
Lardaro predicted that the state will have to increase co-payments for RiteCare and enact some restrictions on the low-income families who benefit from the program.
In Rhode Island, the two major taxes that support state government -- the sales and income levies -- have either decreased or remained stable since Governor Almond took office in 1993. The state's income tax has dropped from 27.5 percent of a taxpayer's federal income tax liability to the 25 percent figure that becomes effective in January.
REP. ANTONIO PIRES is a Pawtucket Democrat who chairs the House Finance Committee, which oversees tax and spending issues in the General Assembly. Pires said he and other Assembly leaders were "well aware" of Rhode Island's overreliance on property taxes in recent years when they approved state financial policies.
When the figures for 2000 and 2001 become available, Pires predicted last week, Rhode Island's tax burden will drop relative to other states.
"We are clearly moving in the right direction," said Pires. "Our whole plan has been based on getting property taxes down, which is why we went after the auto tax."
The state is on track to phase out car taxes by 2007 and the business inventory tax by 2009. In addition, the state's capital gains tax on assets held for at least five years is due to expire in 2008.
Still, Rhode Island ranks very high -- sixth in the country -- in reliance on property taxes. This dubious distinction has gotten worse in recent years; the state ranked 10th in this measure a decade ago.
The main reason, says Sasse, is because Rhode Island relies more heavily on property taxes to finance schools than most other states.
"We haven't gained control over school spending," says Sasse. "Until we do, property taxes are going to continue to escalate."
Sasse also said that an economic downturn will force legislators and Almond to put the brakes on state spending, which has increased sharply in recent years.
"There are clearly some clouds on the horizon and some hard choices to be made. If you worry about controlling spending, you won't have to worry about raising taxes," said Sasse.
Lardaro also said he believes the state's 7 percent sales tax is a bigger thorn in the side of business than the figures show. "The sales tax doesn't show up in glaring statistics, but every company that expands or locates here seems to want a sales-tax exemption."
Rhode Island has held up about as well as most other states in dealing with the slow economy, says Sasse. According to the Index of State Economic Momentum, Rhode Island ranked 27th among the 50 states in the second quarter of 2001. The index measures income growth, population growth and employment growth.
Rhode Island did well, Sasse said, in personal income growth, ranking 14th among the 50 states, with average income up 6.6 percent between May 2000 and May 2001. The state did not do so well in creating new jobs in that period, ranking 34th nationally, with a .6 percent increase in jobs.
With computer-assisted reporting by Ariel Sabar
Digital Extra:
Review Journal coverage of Census 2000 with stories, maps, charts and additional Web resources at:
http://projo.com/news/census/
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