01:00 AM EDT on Tuesday, June 1, 2004

THE JUNE 2004 issue of Bloomberg Wealth Manager warns well-to-do people, once again, to avoid what the publication calls "tax-hell Rhode Island."

Indeed, Rhode Island is the worst place in the country -- ranked 51 among 50 states and the District of Columbia -- for people who wish to keep some of their wealth.

Retirees, too, are warned away.

The best states for retirees, in terms of tax policies, are Hawaii, Wyoming, Delaware, Colorado, Arizona, Alabama, Nevada, Louisiana, Alaska and Washington. Florida ranks 11th.

The worst are Wisconsin, Nebraska, Connecticut, Kansas, Rhode Island, New Jersey, Illinois, New York, Texas and Maine. I guess Rhode Island should be proud because it climbed from 51st, worst in the nation, in 2000, to 47th, in 2004.

And you wondered why so many public employees in Rhode Island take early retirement, and take themselves -- and the money they reap from taxpayers -- out of state -- especially to Florida.

The Bloomberg study is more evidence, if you needed any, of the rape of Rhode Island by politicians who are either too small-minded or too uninterested in the public's welfare to consider what they are doing to the people they supposedly serve.

We all know the classic class-warfare line. The wealthy? To heck with them! Let them pay higher taxes so that middle-class public employees can make out like bandits. And why would we ever consider cutting rich people's taxes when the state is facing huge deficits? After all, the poor and the children will suffer if we restrain government (i.e., by reducing public-employee jobs or curbing their benefits).

There's one problem with Rhode Island's class-warfare approach: People in this country are free to move around and pursue their economic self-interest. Which is why there is a market for publications like Bloomberg Wealth Manager.

Consider what the magazine discovered ("Ride the Wave," by Janet Bamford and Thomas D. Saler) by running state and local tax forms through Quicken's Turbo Tax program. A hypothetical well-to-do family, under one calculation, would pay $7,259 in taxes in Wyoming; the same family would pay $56,419 in Rhode Island.

Now, living in Rhode Island is wonderful. Is it eight times more wonderful than Wyoming? Is it seven times more wonderful than the Rocky Mountain State, Colorado ($8,003 in taxes)? Is it that much more wonderful than less punishing Hawaii, or Arizona, or Massachusetts?

At some point, well-to-do people make such calculations. And when a state is described nationally (and internationally) as "tax-hell Rhode Island," they know to steer cleer.

So who needs upper-middle-class people? To heck with them.

Except: They do contribute something to a community. Let us count the ways:

Jobs. Corporations tend to be where executives want to live. The beauty of Rhode Island, its superb quality of life and its proximity to New York and Boston would surely draw them to the Ocean State -- if not for its tax burden. Why would they throw away money to live here, when they could make a better life for themselves and their families somewhere else?

Charity. Well-to-do people are the lifeblood of community institutions, including charities and arts and civic organizations.

Taxes. It's better to get something from wealthy people than to drive them away and get nothing. A vibrant economy would generate many more tax dollars to pay for education, road and bridge repairs, health care -- the lot.

Civic culture. Corporate executives tend to demand better services from local government, and their presence on local boards can lift the standards of excellence, particularly in public education, an area in which Rhode Island has been performing poorly.

Families. Rhode Island does a good job of splitting apart loved ones. Because its tax and regulatory structure chokes off new jobs, children often must move out of state for work. And because it is one of the worst places for retirees, elders often move far away, taking their spending power with them.

Rhode Island, in trying to punish the wealthy, has only ended up punishing its middle-class and poor citizens.

Obviously, there is more to choosing one's home than tax implications. Few New Englanders would feel comfortable about moving to, say, wealth-friendly Alabama or Louisiana.

But Delaware, the second-smallest state, ranks ninth in wealth-friendliness, one reason it is faring well economically. And lovely New Hampshire (which is booming) ranks 12th.

"And remember New Hampshire's neighbor, 'Taxachusetts'? It looks as if Massachusetts may be able to finally retire that derisive nickname, as the state, now at No. 25 (from No. 35 four years ago) is more wealth-friendly than half the states in the nation," notes the magazine.

It's not that hard for well-to-do people to choose between the former "Taxachusetts" and Rhode Island, to the Ocean State's loss.

I shiver to think what they would dub Rhode Island. Welcome to "The Tax-Hell State"!

Edward Achorn is The Journal's deputy editorial-pages editor. His e-mail address is eachorn [at] projo.com.