Volume rising at RI Statehouse as budget demands mount

• Rhode Island advocates are pushing for a 3% tax on high earners to fund social programs and address budget shortfalls.
• Proposed funds would support RIPTA, Medicaid, education, and healthcare initiatives.
• Supporters argue the tax would address inequities in the tax system, while opponents fear it could lead to wealthy residents leaving the state.

PROVIDENCE – You can tell the behind-the-scenes budget negotiations are at a critical point when the noise level at the State House reaches a fever pitch.

And that volume rose to its highest point yet on May 29 as megaphone-amplified voices chanted “tax the rich!” to raise a potential $190 million in new state dollars that would be used to, according to advocates:

Save RIPTA by closing the $32 million funding shortfall. Plug whatever cuts Congress makes to SNAP, Head Start and Medicaid. Pour many more millions into multilingual education for non-English speaking students. And fix the state’s health care crisis.

And it’s not just chanting, sign-carrying advocates rallying and making noise.

A day earlier, Attorney General Peter Neronha spelled out his proposal for fixing Rhode Island’s teetering health care system, including a multimillion dollar legislative increase in Medicaid reimbursements to primary care doctors.

A bill to do that was introduced at his behest the same day: H6373.

It would have the Executive Office of Health and Human Services allocate “sufficient state revenue to increase Medicaid payment rates for primary care services to … no less than 100% of Medicare rates … effective beginning July 1, 2025.”

“Let’s do a poll of Rhode Islanders and ask them, what should be at the center of our budget planning?” Neronha asked rhetorically during his press conference. “I guarantee you, health care will be in the top five, maybe in the top three. So that’s where we should start.”

What do RI’s ‘tax the rich’ advocates want?

The advocates leading Thursday’s rally had an even longer list of demands, starting with passage of legislation creating a 3% income tax surcharge on high earners to raise an estimated $190 million in new state revenue.

They included the RI AFL-CIO, Climate Action Rhode Island, the National Education Association of Rhode Island − headed by new Senate President Valarie Lawson – the Economic Progress Institute, the Revenue for Rhode Islanders Coalition, RI Working Families Party, SEIU-1199, Indivisible RI and Reclaim RI.

The focus of the event, according to the media advisory: “To demand leadership make the richest 1% pay their fair share in taxes to protect what’s on the chopping block – Medicaid, hospitals, food stamps, school funding, RIPTA and more.”

Their argument: That the richest 1% of Rhode Islanders pay just 8.6% of their income in taxes, while the lowest income Rhode Islanders pay over 13%.

“In Massachusetts, a similar tax that brought in $2.4 billion in the first year has helped fund free school meals for students and school repairs, free bus service and expanded public transit routes; seven thousand more child care seats, road and bridge improvements in every city and town and more,” the advisory said.

Will it actually pass?

Legislative leaders have made it known that “everything is on the table,” but a tax hike would not be their first choice.

“As we approach the final weeks of the session, there is no shortage of meritorious proposals that affect state resources,” House Speaker K. Joseph Shekarchi told The Journal.

“The magnitude of the uncertainty of the federal funding picture, and the numerous holes in the governor’s proposed budget, complicate both balancing this year’s budget and planning for the unknown,” he said.

The “holes” include: the McKee administration’s quiet withdrawal of a “cost-saving” proposal to close the minimum security prison that, on closer look, could cost $67 million to $92 million more; a $15 million under-estimate of the cost of his contract settlement with state troopers and prison guards and an unpopular McKee move to divert $26 million from the pension fund.

“I continue to keep many options on the table for this challenging task,” said Shekarchi, who tops the House budget negotiating team.

‘The top 1% are still going to be okay’

The rally was timed the same day the Senate Finance Committee is scheduled to hold a hearing on Sen. Melissa Murray’s version [S329] of the “Tax-The-Rich” bill the House Finance Committee considered earlier this session.

And it’s a fair guess the senators will hear most of the same arguments their counterparts in the House heard early in May for and against the bill to create a new 3% surcharge on income above $625,000 – in practice, $750,000 in pre-tax total income

According to an estimate from the Center on Budget and Policy Priorities, the top 1% of households in the country (starting at $743,000 a year) would get a $61,000 reduction in federal taxes a year if the federal tax cuts adopted during the first Trump Administration are extended. (The estimate comes from a January report from the Department of the Treasury.)

Under the proposed bill, a household making $1 million a year would pay an extra $10,500 in state taxes.

“The top 1% are still going to be okay,” said Rep. Teresa Tanzi.

But there are two buckets of people in the 5,700 estimated Rhode Island taxpayers who would have slightly higher taxes – the very wealthy and small business owners who are incorporated as limited liability companies or corporations.

Might they forgo a new hire or not buy a new piece of equipment? Might they flee the state?The Rhode Island Public Expenditure Council has warned that the wealthiest Rhode Islanders will likely flee the state if the income tax is increased.

In written testimony, Jon Duffy, of the advertising and public relations firm Duffy & Shanley, wrote that one of the partners in his business “has already become a Florida resident” to avoid paying Rhode Island’s state taxes.

But the Economic Progress Institute in March put out a paper that said: “There is simply no evidence – not in Rhode Island and not anywhere in the United States – linking changes in top tax rates with large-scale net migration of higher-income residents or of interstate migration in general.”

At the May 29 rally, the EPI’s police director Nina Harrison said Rhode Island has enough for everyone, but it’s not being shared fairly.

“Right now, people earning less than $23,000 a year are paying a larger portion of their income in state and local taxes than millionaires do in this state,” she said.

“That’s not only backwards, it’s unjust and it’s unacceptable.” Her argument:

• “Rhode Island has crisis level shortage of child care. Nine out of 10 families cannot afford quality childcare. The time to act is now.”
• “Rhode Island has a crisis level shortage of primary care doctors. I’m losing mine next month with the closure of Anchor Medical. The time to act is now.”
• “Public schools are failing too many of our children and they deserve better. The time to act is now and if we don’t act now, not only are we failing our children, we’re going to feel that in our state economy later when we need workers to do the essential jobs in this state.”
• “People and businesses and essential workers will leave this state. If we don’t have good schools, affordable housing, good public transportation, or enough doctors. The time to act is now.”

“If we want to stop having budget deficits and meet the needs of Rhode Islanders, we need to fix our tax system and have everyone pay their fair share. The time to act is now,” she finished.