Rhode Island debates raising taxes on the rich – The Boston Globe

On Thursday, a group of progressive lawmakers joined the Working Families Party in announcing a set of four bills, branded the “Fair Share for Rhode Island Package,” that would go beyond McKee’s proposal to generate $650 million in annual revenue by boosting taxes on the wealthy.

Representative Brandon C. Potter, a Cranston Democrat, called McKee’s proposal “a strong step forward,” but said, “It simply does not do enough to meet the needs of working people in Rhode Island right now.”

Potter emphasized that President Trump’s “One, Big, Beautiful Bill Act” would provide about $1 trillion in federal tax cuts for the richest 1 percent over the next decade while slashing health benefits and food assistance for lower-income Rhode Islanders.

“We need to meet this moment,” Potter said. “In a state controlled by Democrats, we have the opportunity to demonstrate what it means to fight for working people and deliver on our values in the way that this moment calls for.”

The “Fair Share for Rhode Island Package” includes:

● A 1 percent tax “wealth tax” on a Rhode Island tax filers who have worldwide financial assets of more than $25 million. That would generate a projected $300 million per year.

Potter and Senator Tiara T. Mack, a Providence Democrat, are sponsoring that legislation, which would apply to financial intangible assets such as stocks, bonds, options, and annuities, and not to the value of houses or other real estate property, or nonfinancial intangible assets such as patents or brand recognition.

Mack said the tax would affect 1/14th of the state’s richest 1 percent. “And because wealth is so concentrated amongst this very small percentage, this small tax on the richest Rhode Islanders will raise $3 billion over the next 10 years,” she said.

● A 3 percent surtax on taxable income of more than $640,000. That would generate a projected $200 million a year.

Representative Karen Alzate, a Pawtucket Democrat, said this is the seventh year that she and Senator Melissa A. Murray, a Woonsocket Democrat, have sponsored the legislation, and in light of Trump administration cuts, she said it’s more crucial than ever.

Alzate said the Massachusetts millionaires tax has provided that state with billions in revenue to improve health care and schools and lure big business such as Hasbro, which is moving its headquarters from Pawtucket to Boston. ”There is no mass exodus,“ she said. ”Just stronger communities.”

● A 4 percent “wealth proceeds tax” that would generate a projected $144.4 million per year.

Representative Teresa A. Tanzi, a South Kingstown Democrat, and Senator Meghan E. Kallman, a Pawtucket Democrat, are sponsoring the legislation, which aims to equalize the tax treatment of earned and unearned income by taxing “passive income” such as capital gains, dividends, interest and annuities, along with certain kinds of rents, royalties and business income. It would not tax income derived from active participation in a business or a retirement income such as Social Security, pensions, 401(k)s and IRAs.

● A digital ads tax that would generate an undetermined amount of revenue.

Kallman and Representative Terri Cortvriend, a Portsmouth Democrat, are sponsoring legislation that would tax the revenue of major tech companies, such as Meta and X, that make money from digital advertising. Only businesses with $1 million in annual gross revenue from digital ad services in Rhode Island would be required to file the new digital advertising tax return.

Last year, McKee proposed a 10 percent tax on digital advertising revenues in the state, which would only apply to media companies with more than $1 billion in global revenues.

Apple, Meta, TikTok, and Microsoft hired local lobbyists in Rhode Island to try to kill the proposal, and it was not included in the budget passed by the General Assembly. House Speaker K. Joseph Shekarchi, a Warwick Democrat, said the proposal was too speculative, noting only Maryland had tried such a tax and it was facing lawsuits.

The four tax proposals are facing strong opposition from business groups.

Laurie White, president of the Greater Providence Chamber of Commerce, criticized the proposals, saying increases in the personal income tax would hurt many small businesses.

Most of the state’s small businesses are organized as pass-through entities, meaning their business profits are taxed under the personal income tax, not a separate corporate tax, White said. Potter disputed the extent of the impact of a tax on income of more than $640,000.

But White said, “For thousands of small businesses, it is a direct tax on their operating income, and it ultimately affects employees through fewer opportunities and slower growth.”

White said the Working Families Party is supporting higher taxes while placing less emphasis “on ensuring accountability and measurable results from government.” For example, Rhode Island spends more per pupil on education than most states, and the outcomes are “mixed,” she said.

“Higher taxes alone do not necessarily lead to better public services,” White said. “We support the principle of reform before revenue and believe that Rhode Islanders deserve better accountability and quality government services for their tax dollars.”

She said state general revenue spending for fiscal year 2026 will reach $5.81 billion, marking an 11 percent increase in two years and outpacing inflation. “When spending grows at that rate, no narrowly targeted tax hike can meaningfully address the underlying problem,” she said.

White said the proposed digital advertising tax would hurt small businesses that use digital ads to grow their businesses, and raise prices for consumers. “It is also unclear whether or not it is constitutional,” she said.

On Friday, spokesmen for House and Senate leaders responded to the four tax proposals, saying, “When the legislation is introduced, it will undergo the usual thorough and public committee review process for consideration on its merits.”

Edward Fitzpatrick can be reached at edward.fitzpatrick@globe.com. Follow him @FitzProv.