• Rhode Island reformed its tax code after 2009, improving its business tax climate ranking from 46th to 40th.
• Democratic gubernatorial candidates are now proposing to raise the top income tax rate from 5.99% to 8.99% for incomes over $1 million.
• Supporters of the tax increase believe it will have minimal impact on growth, while opponents fear it will harm state competitiveness.
• The author suggests key questions must be answered about the economic impact before implementing such a significant tax policy change.

In the 2009 State of the State address Governor Don Carcieri said he was “tired of people writing stories about Rhode Island being ‘tax hell’.” In response the governor convened a Tax Policy Strategic Workgroup. As state director of revenue, I chaired the Workgroup. We were charged with developing a tax strategy so that Rhode Island’s tax structure would be a competitive advantage in retaining jobs and recruiting businesses.

Over the next few legislative sessions, the state’s tax code was reformed. The top marginal income tax rate was reduced from 9.90 percent to 5.99 percent. As a quid pro quo itemization was eliminated, the standard deduction and personal exemptions were phased out for high-income filers, the alternative minimum tax was eliminated, tax brackets and exemptions were indexed to inflation, and the numbers of tax credits were reduced from 45 to 9.

The method of apportioning the corporate income tax was modernized, and the tax rate was reduced from nine percent to seven percent – the lowest rate in New England. The threshold of the estate tax deduction was doubled and indexed to inflation.

As a result, Rhode Island escaped the designation of having one of the ten worst tax climates for business. In 2011, when the General Assembly began addressing tax reform, the conservative Tax Foundation’s Business Tax Climate Index ranked the Ocean State’s tax climate 46^th (5^th worst). By 2025 it improved to 39^th. This year Rhode Island ranks 40^th.

Currently both Democratic gubernatorial candidates are proposing a tax policy “sea-change.” They are promoting legislation to impose an 8.99 percent rate on taxable incomes over $1 million, a 50 percent increase over the current rate of 5.99 percent.

Deciding the merits of this proposal should be based on the tenets of sound tax policy: equity, competitiveness, and transparency.  Equity is achieved when no group carries a disproportionate share of the tax burden.  Transparency is achieved when the system is user-friendly and efficiently administered.

The most difficult principle to measure is competitiveness. Economists have not always agreed on the effect tax burdens have on the economic decisions made by households and businesses.

Can a top marginal income tax rate be increased by 50 percent and not have a demonstrable impact on job growth and investments?

It will be challenging to resolve this question because the “peer reviewed research” supports different conclusions. Academic research through the 1960s generally found limited evidence that tax rate differentials influenced business growth and location decisions. In the 1980s, studies found the impact of tax burdens on private sector economic activity depended on specific circumstances. More recent empirical studies indicate tax changes do influence economic behavior. However, there are difference as to the degree of such influences.

Rhode Island’s business leaders opposed to the 50 percent increase in the top marginal tax rate point to state competitiveness rankings, potential out-migration of people and capital, fiscal volatility, and the impact on small business. Progressive proponents cite data suggesting top-rate increases rarely affect state-level growth, and high-income migration responses are marginal.

Given economic and international uncertainties, could the timing of income tax rate increase be a riverboat gamble with Rhode Island’s future economic well-being?  An informed decision should provide data and analysis on the following threshold questions.

What is the forecasted impact of the millionaire’s tax on state GDP growth, employment, and revenue feedback effects?

Without doing harm, how high can the rate be set relative to competitor states? If the top marginal rate was increased by 15% compared to the 50%, how would the gamble be mitigated?

What will the new revenue be used for – education, infrastructure, housing, working families tax relief, or balancing the budget?

What are the costs and benefits of maintaining the status quo?

Will Rhode Island’s availability of skilled labor, preparedness for an artificial intelligence economy, and other amenities minimize any potential economic impacts of a 50 percent increase in the top income tax rate? Some states may have competitive advantages that could reduce the economic risks, while others may not.

Gary Sasse served as director of the R.I. Departments of Revenue and Administration.

One of my favorite things to do on any trip, no matter the destination, is to stop at every point of interest along the way. It doesn’t matter if it’s a kitschy roadside attraction, a natural wonder, or a diner – I will stop. Growing up in northern Rhode Island, I’ve been to just about every corner of my tiny home state and, yet, always seemed to discover something new-to-me on every outing. While most Ocean State road trips are short (it is the smallest state in the country, after all!), there’s still so much to discover, including one off-the-beaten-path diner in Foster. Let’s discover one of the best road trip stops in Rhode Island you probably never heard of – Shady Acres Diner and Apocalypse Cafe.

Why This Stop Is Worth the Detour

If you’re looking for a classic American diner experience right here in the Ocean State, look no further than Shady Acres Diner and Apocalypse Cafe. Located on Danielson Pike, a scenic, rural stretch of Route 6, less than two miles from the Connecticut border, you probably never knew this place existed unless you were driving through Foster on your way to or from Connecticut. But road trippers who have stopped here rave about the menu, friendly service, and the eclectic decor.

Let’s first talk about the menu. While there are some “typical diner” menu items, such as omelets, French toast, and eggs Benedict for breakfast, and chicken tenders, BLT club sandwiches, and burgers for lunch and dinner, there are some elevated and creative takes on diner cuisine. For example, in addition to a standard selection of diner favorites, there’s a Monte Cristo breakfast sandwich of egg, ham, and Swiss cheese between two pieces of French toast, as well as several breakfast bowls with scrambled eggs, home fries, and a variety of toppings.

For creative lunch and dinner options, how about the Big Kahuna Tuna sandwich made with ahi tuna, greens, and chipotle mayo? Regular customers rave about it! There’s also a falafel plate, perfect for sharing, and a fried pickle burger topped with queso and house-made fried pickles. But one of the most talked-about menu items at Shady Acres Diner is the polenta fries. Growing up in the Ocean State, I had my fair share of polenta dishes, but I never had polenta fries – looks like I’ll need to make a stop here to try this standout appetizer.

Shady Acres is open Wednesday through Saturday, from 8 a.m. to 8 p.m., and Sundays from 8 a.m. until 2 p.m. Plan your road trip to this Rhode Island diner accordingly!

Nearby Road Trip Attractions

Foster may be a small, rural Rhode Island town, but there are a few notable sites you may want to discover while here. First of all, did you know that Foster is home to Rhode Island’s highest point? Located off Route 101 close to the Connecticut border, Jerimoth Hill sits at an elevation of 812 feet and is open from dawn until dusk daily if you’re curious to see it yourself. A short 0.3-mile trail leads to the point, which is surrounded by trees.

If you love visiting historic sites, take some time to visit the Swamp Meadow Covered Bridge. Built in the mid-1990s, yet evoking the charm of a historic 19th-century covered bridge, it’s the only covered bridge in Rhode Island.

Open seasonally on weekends starting in May, Nickle Creek Vineyard is a small, family-owned vineyard and winery with a tasting room. Reservations are not required to visit, and guests are welcome to stroll the grounds and bring a picnic to enjoy while sipping Nickle Creek wines. (Please note that those under 21 are not allowed on the property.)

Best Road Trip Stops in Rhode Island

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Shady Acres Diner may be off the beaten path, but it’s absolutely worth it for its hearty dishes that will satisfy any hungry road tripper. Have you taken a detour or gone out of your way to have a meal at this family-friendly diner, one of the most unexpected places in Rhode Island? For a menu and location information, visit the Shady Acres Diner website, and check out the Facebook page for dinner specials.

What are some unexpected places in Rhode Island you would suggest road trippers visit? Please tell us why they are worth a stop when you fill out our nomination form. You can discover more exciting off-the-beaten-path destinations in Rhode Island when you use Only In Your State’s Travel Planner.

The Wildlife Clinic of Rhode Island rehabilitated two orphaned kitten bobcats starting last July and continuing through Monday, March 30, when the bobcats were released into the wild. Video from the Wildlife Clinic of Rhode Island and URI’s Quest Lab.