In January, Governor Daniel J. McKee touched off a debate about a millionaires tax by proposing a state budget that would impose a 8.99 percent tax rate on personal income of more than $1 million — a 3 percentage point increase over the current top bracket that would have generated $67 million in fiscal year 2027.
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The House Finance budget would phase in that millionaires tax by raising that top rate by 1 percentage point per year over three years — 6.99 percent for tax year 2027, 7.99 percent in 2028, and 8.99 percent for 2029. The move would generate an estimated $22 million in 2027, $68 million in 2028, $115 million in 2029, and $142 million in 2030.
Blazejewski said phasing in the millionaires tax will help Rhode Island deal with federal funding cuts as they take effect in the years ahead. Advocates see that tax as a crucial source of funding for essential programs amid federal cuts, he noted, while opponents predict it will hurt small businesses and drive away rich residents.
“We thought this strikes the right balance here for our state, given the situation we’re in with the federal government,” Blazejewski said. “We think this is a prudent way of increasing revenue over time, and then phasing it in, so it has less shock, it has more time to be absorbed, and then also comes online exactly when we need it.”
Rhode Island is pursuing a millionaires tax three years after Massachusetts imposed a 4 percent millionaires tax on top of its 5 percent income tax, raising billions in revenue. On May 25, the Globe reported that the Massachusetts surtax on that state’s highest earners has already generated more than $3.1 billion in revenue this fiscal year, with two months remaining — surpassing the $2.4 billion projected.
Inspector general
The House Finance budget includes $1.3 million to fund an independent inspector general’s office staffed with 12 full-time employees who will investigate waste, fraud, and abuse in state government.
Blazejewski called for creating an inspector general’s office soon after becoming House speaker on May 7. The move by the state’s most progressive House speaker came as a surprise to some because Republicans have long made the inspector general’s office a top legislative priority.
But Blazejewski noted he introduced inspector general legislation in 2015. On Friday, he said the federal government is cutting funding at the same time the state has seen “high-profile state failures” such as the closure of the Washington Bridge westbound and the botched rollout of a $99 million state payroll system.
McKee and Republican lieutenant governor candidate John J. Loughlin II questioned why Blazejewski wants the inspector general to oversee the executive branch — but not the Legislature.
On Friday, Blazejewski noted that voters approved a separation of powers amendment to the state Constitution in 2004 to ensure the three branches of government are separate and distinct, and that the inspector general’s office would be an administrative agency of the executive branch.
“If you allow the executive office to run roughshod over the Legislature, the judiciary, you no longer have three branches of government,” Blazejewski said. “It’s not original to Rhode Island. It’s a fundamental principle of government.“
RIDOT audit
The budget includes an audit of maintenance work by the state Department of Transportation. “We just have had too many high-profile failures, and we need to conduct an audit as to the maintenance program,” Blazejewski said.
The budget also removes the Department of Transportation director as chairman of the Rhode Island Public Transit Authority. Former DOT director Peter Alviti Jr. began serving as chairman of the bus agency’s board in 2023. But Blazejewski said, “We just think it’s a conflict of interest.” The DOT director can continue to serve on the board, but not as chairman, he said.
No line-item veto
The House Finance budget rejects McKee’s call for placing a constitutional amendment on the November ballot asking voters to give the governor line-item veto power, which would allow him to strike specific items from the budget without having to approve or veto the entire bill.
Last year, McKee refused to sign the state budget approved by the General Assembly because it raised taxes and fees, but he did not veto the bill. And McKee noted that 43 other states have some form of line-item veto authority.
But Blazejewski said, “That line item veto is about changing the power structure between the governor and the General Assembly,” and the current process works with the governor proposing a budget and legislators passing a budget. Other states have had “issues” with the line item veto, he said, noting Wisconsin’s governor used that power to delete words, numbers, and punctuation from a bill to change its meaning.
Budget exceeds $15 billion
The budget totals a record $15.2 billion for the fiscal year that starts July 1, marking an increase over the $14.859 billion proposed by McKee.
In August, the business-backed Rhode Island Public Expenditure Council warned that the state’s rate of spending was not sustainable. And in the Republican response to McKee’s State of the State, House Minority Leader Michael W. Chippendale said the state budget has grown by 200 percent since 2000, when it was about $4.5 billion.
URI medical school funding
The House Finance budget includes $5 million as an initial investment in creating a medical school at the University of Rhode Island.
The Senate had included that proposal in a 17-bill package aimed at strengthening the state’s strained health care system. Blazejewski said the medical school will help alleviate the state’s severe shortage of primary care doctors in the future.
Tax on Social Security
The House Finance budget includes the first year of McKee’s proposal to eliminate state personal income taxes on Social Security benefits over three years.
Under current law, taxpayers who have reached full Social Security retirement age (67 or older) and have incomes of less than $107,000 for single filers, or $133,750 for joint filers, are exempt from state income tax on Social Security income. The House agreed to eliminate the current minimum age threshold.
Child tax credit
The House Finance budget does not adopt McKee’s proposal to replace an existing tax deduction for dependents with a new child tax credit that would refund families $325 on their taxes per child, per year.
But it does build on the existing tax deduction structure and adds a $330 child tax credit to help lower income families. Blazejewski said the new system “costs a little bit more but gives even more of a benefit to families in Rhode Island.”
Bond questions
The budget includes a record $600 million in bond questions on the November ballot, but it modifies some of the proposals in McKee’s budget.
- Blazejewski said McKee’s budget “underfunded” an integrated health building at URI. So the budget provides $275 million (rather than $215 million) for the state’s three colleges, including $165 million (rather than $105 million) for the URI building, $50 million to renovate Rhode Island College’s Adams Library; and $60 million for a workforce innovation center at the Community College of Rhode Island.
- $120 million for housing, including $25 million for producing housing units for homeownership.
- $100 million (rather than $115 million) for economic development, including $55 million (rather than $70 million) for site development at the Quonset Business Park and I-195 District.
- $50 million for the “cultural economy,” including $45 million for a State History Center that would display the state’s founding documents.
- $55 million for “green economy bonds.” Blazejewski said, “Our caucus spoke over and over about making the green bond greener, and we’ve done just that.“
- The House budget eliminated the $50 million McKee proposed for Career and Technical Education. Blazejewski said testimony indicated the proposal was underfunded even at $50 million, “so we’re going to go back to the drawing board.”
Energy proposals
The House Finance budget adopts some, but not all, of McKee’s proposals for lowering energy bills.
House Majority Whip Katherine S. Kazarian, an East Providence Democrat, said the budget expands the renewable energy standard to including hydro and nuclear energy, which will result in savings.
But she said the budget would reject McKee’s plan to push back the 2033 deadline to reach 100 percent renewable energy sources for state electricity until 2050. “We’re going to continue to keep that 2033 deadline, which is really important to our caucus and, frankly, to the renewable energy investments that have come to the state,” she said.
Central Falls schools
The budget returns the Central Falls school district to local control after 35 years of state control. Blazejewski said this was a priority of Central Falls Mayor Maria Rivera.
Domestic violence calendar
The House budget includes $600,000 to hire three full-time employees and create a domestic violence calendar in state Superior Court to address a backlog of 1,200 felony domestic violence cases.
The House Finance Committee voted 11 to 2 to send the budget to the House floor for a vote next Friday, June 5.
Edward Fitzpatrick can be reached at edward.fitzpatrick@globe.com. Follow him @FitzProv.
