While Gov. Dan McKee pledged to not raise taxes during his 2025 State of the State address, a crowd of progressive advocates gathered a floor below him rallied for higher taxes on the state’s top earners.

The perennial push to bring a millionaire’s tax to Rhode Island got off to an earlier and more fiery beginning than usual this year. Not surprising, given what’s at stake on both sides of the debate.

To proponents, the tax policy offers a crucial way to boost state revenues, staving off cuts to social services, public transit and health care amid projections of a $223 million structural deficit for the fiscal year that starts July 1. Legislation proposing an extra tax on the top 1% of state earners is slated to be introduced in both chambers this week.

Equally stalwart in their opposition, naysayers insist the tax will cause employers and wealthy residents to seek tax-friendlier pastures.

Including Hasbro Inc. The Pawtucket-based toy and gaming empire is considering a move to Massachusetts, citing the stronger talent pool and access to amenities that Rhode Island lacks.

The absence of a millionaire’s tax, though, is one way the Ocean State can still compete against its northern neighbor, which began a 4% surtax on income over $1 million in 2023.

“It’s a competitive advantage,” House Speaker K. Joseph Shekarchi said, speaking to reporters after Gov. Dan McKee’s State of the State address on Jan. 14. “I think the governor is using that to keep Hasbro and the Hasbro workers in Rhode Island.”

Hasbro did not return multiple inquiries for comment. Company executives have never mentioned state income taxes in publicly released emails or investors’ calls regarding potential relocation plans.

But it’s clear to Laurie White that the company’s calculus on whether to stay or go hinges on costs associated with doing business — including income taxes.

“It’s about two things: access to talent and the cost structure,” White, president of the Greater Providence Chamber of Commerce, said in an interview. “We can’t compete 1-to-1 with Massachusetts on the talent basis. But on taxes, that’s a consideration.”

Rhode Island lacks the appeal of states like New Hampshire or Florida, which don’t tax personal income at all. But it managed to edge out Massachusetts for the first time in a decade last year, in a ranking of state business tax climates by the Tax Foundation.

Rhode Island ranked 41st among states with the most business-friendly tax policies, while Massachusetts fell to 46th. The report cited Massachusetts’ millionaire’s tax as a key reason for its lower ranking compared with past years.

“We do not want to lose that momentum,” Olivia DaRocha, a spokesperson for McKee, said in an email. She also raised an oft-cited argument among opponents of wealth taxes: that states that raise taxes see their top-earners move elsewhere.

A separate Jan. 7 analysis by the Tax Foundation linked lower state income taxes to where people moved within the United States in fiscal year 2024.

The Commonwealth saw the sixth-largest net loss in residents in fiscal 2024, losing .39% of its population, based on an analysis of U.S. Census Bureau data. Rhode Island’s population shrank ever-so-slightly, down .03%, according to the report.

“Rhode Island should learn a lesson from its neighbor to the north about targeting residents’ incomes,” Katherine Loughead, senior policy analyst and research manager for the Tax Foundation, said in an interview. “Rhode Island is already trending in the wrong direction. Outbound migration could be expected to get considerably worse if Rhode Island was to adopt a significant tax increase.”

Not so, according to Alan Krinsky, director of research and fiscal policy for The Economic Progress Institute, which has supported a Rhode Island millionaire’s tax. Ahead of a forthcoming Institute research paper on the “tax migration myth,” Krinsky poked holes in the Tax Foundation’s analysis.

For one thing, Massachusetts was already losing residents at a similar clip even before voters approved the millionaire’s tax. Also noteworthy to Krinsky are the sizes of population swings, which range from .65% loss in Hawaii to 1.26% gain in South Carolina.

“That’s hardly a mass exodus,” Krinsky said.

Meanwhile, other studies suggest taxes hold little sway over where people move. New York saw the number of millionaire households increase by 17,500 from 2020 to 2022, despite imposing a higher tax on income over $1.1 million during that time period, according to a December 2023 report by the Fiscal Policy Institute. Residents who earned over $850,000 a year were less likely to move out of state than people in lower-income brackets, the report found.

Loughead acknowledged that taxes are just one factor in a complex decision of where to move: cost-of-living, particularly housing costs, also plays an important role. New England overall has seen its population decline because of a higher median age and migration to southern states.

Fiscal and policy experts largely agree it’s too early to draw conclusions from Massachusetts’ tax on millionaires. Initial state estimates predicted a $2.2 billion revenue boost from the surtax in fiscal 2024. The Massachusetts Department of Revenue projected $2.4 billion revenue from the tax in fiscal 2026 budget projections, according to news reports.

Less abstract than future forecasts about revenue and population are the financial woes facing the Rhode Island Public Transit Authority, hospitals, and social services. All the more reason, Krinsky said, to consider a surtax on top earners.

Rep. Karen Alzate, a Pawtucket Democrat, plans to introduce legislation this week calling for a 3% surtax on the top 1% of state earners. Preliminary number-crunching suggests that, if approved, the tax would bring in $190 million in revenue per year, affecting residents with net taxable income of $650,000 or more.

Alzate, who introduced similar, though not identical legislation last year, hoped the looming budget deficit might make previous critics take a fresh look at her proposal.

“This is the year to do it,” she said. “We are facing a real deficit and we cannot afford to cut social services and education.”

McKee’s initial fiscal 2026 spending plan did not include higher taxes on top earners. Senate President Dominick Ruggerio has already signaled his opposition. Shekarchi pledged to remain open to all ideas.