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Historical Rhode Island tax policy information

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The historical Rhode Island tax policy information below is presented as it was written on Ballotpedia in 2015. For more current information regarding tax policy, click here.

Tax policy in Rhode Island
Budget Policy Logo on Ballotpedia.png
Tax rates in 2015
Personal income tax:
3.75% to 5.99%
State sales tax:
7%
Corporate income tax:
7%
Tax revenues in 2014
Total tax collections:[1]
$2.966 billion
Tax collections per capita:[1]
$2,811
Rank:[1]
20
Public Policy Logo-one line.png
Total state expenditures • State debt • Rhode Island state budget and finances

Rhode Island generates the bulk of its tax revenue by levying a personal income tax, a general sales tax and select sales taxes (otherwise known as excise taxes).

Tax policy can vary from state to state. States levy taxes to help fund the variety of services provided by state governments. Tax collections comprise approximately 40 percent of the states' total revenues. The rest comes from non-tax sources, such as intergovernmental aid (e.g., federal funds), lottery revenues and fees. The primary types of taxes levied by state governments include personal income tax, general sales tax, excise (or special sales) taxes and corporate income tax.[2]

HIGHLIGHTS
  • In 2014, according to the Federation of Tax Administrators, Rhode Island collected $2.966 billion in tax revenues. The state's tax revenues per capita were $2,811, ranking 20th highest in the United States.[3][4]

    • Tax rates

    Personal income tax

    See also: Personal income tax

    The personal income tax rates in Rhode Island for the 2015 tax year ranged from 3.75 percent to 5.99 percent. An individual's tax liability varies according to his or her tax bracket. A tax bracket is the income range to which a tax rate applies. In Rhode Island, there are three income tax brackets.[5][6][7]

    The table below summarizes personal income tax rates for Rhode Island and neighboring states in 2015. Numerical rankings are tabulated by excluding states with no personal income tax (as well as New Hampshire and Tennessee, which charge income tax only on dividends and interest) and are based on the highest possible tax rate for which an individual might be liable. Because some states are excluded from the rankings and a few share common uppermost rates, there are 34 numerical rankings, with 1 indicating the highest uppermost rate and 34 indicating the lowest.[6]

    Personal income tax rates, 2015
    State Tax rates Number of brackets Brackets Ranking
    Lowest Highest Lowest Highest
    Rhode Island 3.75% 5.99% 3 $60,550 $137,650 19
    Connecticut 3% 6.7% 6 $10,000 $250,000 15
    Massachusetts 5.2% 5.2% 1 Flat rate 24
    New Hampshire State income tax of 5% on dividends and interest income only
    Vermont 3.55% 8.95% 5 $37,450 $411,500 7
    Note: For complete notes and annotations, please see the source below.
    Source: Tax Policy Center, "Individual State Income Tax Rates 2000-2015," accessed September 29, 2015

    Personal exemptions

    States that collect a personal income tax allow individuals to claim personal exemptions on income taxes each year. The personal exemption indicates that only a person's income above a certain level is subject to taxation. [8]

    Exemptions work by reducing the amount of an individual's taxable income. Both state and federal taxes allow exemptions. The state exemptions for Rhode Island and its neighboring states as reported by the Tax Policy Center are reported in the chart below.[9]

    In Rhode Island, state personal exemptions for single filers were equal to $3,850, which was lowest among its neighbors that allowed for personal income tax exemptions. Exemptions for those filing as a married couple were equal to $7,700 in 2015. Rhode Island regulations also allow filers to receive exemptions for dependents. These exemptions were equal to about $3,850 in 2015.[10]

    Personal exemptions, 2015
    State Single Married Dependents
    Rhode Island (a) $3,850 $7,700 $3,850
    Connecticut $14,500 $24,000 $0
    Massachusetts $4,400 $8,800 $1,000
    New Hampshire No state income tax
    Vermont (a) $4,000 $8,000 $4,000
    Note: For complete notes and annotations, please see the source below.
    Source: Tax Policy Center, "Individual State Income Tax Rates 2000-2015," accessed September 29, 2015

    Capital gains tax

    See also: Capital gains tax

    A capital gains tax is a tax levied on the profit gleaned from the sale of a capital asset. Examples of capital assets include stocks, businesses, land parcels, homes, personal items and more. Capital gains are taxable at both the federal and state levels. While the federal government taxes capital gains at a lower rate than regular personal income, states usually tax capital gains at the same rates as regular income. In Rhode Island, the uppermost capital gains tax rate was 6 percent. The combined uppermost federal and state tax rates totaled 28.6 percent, ranking 16th highest in the nation.[11][12][13]

    The table below summarizes uppermost capital gains tax rates for Rhode Island and neighboring states in 2015.

    Uppermost capital gains tax rates by state, 2015
    State State uppermost rate Combined uppermost rate Ranking
    Rhode Island 6% 28.60% 16
    Connecticut 6.70% 29% 13
    Massachusetts 5.20% 28.10% 25
    New Hampshire 0% 25% 42
    Vermont 9% 30.40% 5
    U.S. AVERAGE 28.70%
    Note: For complete notes and annotations, please see the source below.
    Source: Tax Foundation, "The High Burden of State and Federal Capital Gains Tax Rates," accessed September 29, 2015

    Sales tax

    See also: Sales tax

    Almost all states employ a statewide sales tax, which ranges from 2.9 percent in Colorado to 7.5 percent in California. Additionally, many states allow the levying of local sales taxes, which are then added to the state's tax.

    Rhode Island's state sales tax was 7 percent in 2015. The state did not levy local sales taxes, meaning that the average combined sales tax was 7 percent. This was the 21st highest combined sales tax in the country in 2015, and was highest among its neighboring states. The table below displays the state tax rates, average local tax rates, and average combined tax rates for Rhode Island and its neighboring states.

    Combined sales tax rates, 2015
    State State sales tax Average local sales tax (a) Combined Ranking
    Rhode Island 7.00% None 7.00% 21
    Connecticut 6.35% None 6.35% 31
    Massachusetts 6.25% None 6.25% 33
    New Hampshire None None None 47
    Vermont 6.00% 0.14% 6.14% 34
    "(a) City, county, and municipal rates vary. These rates are weighted by population to compute an average local tax rate."
    Source: The Tax Foundation, "State and local sales tax rates, 2015," accessed November 5, 2015

    The sales tax rate in Rhode Island for tax year 2015 was 7 percent. The table below summarizes sales tax rates for Rhode Island and neighboring states in 2015. The table also notes the state's policy with respect to types of items commonly exempted from sales tax (i.e., food, prescription drugs and nonprescription drugs).[14]

    Sales tax rates, 2015
    State Sales tax rate Exemption status
    Food Prescription drugs Nonprescription drugs
    Rhode Island 7% Exempt Exempt Taxable
    Connecticut 6.35% Exempt Exempt Taxable
    Massachusetts 6.25% Exempt Exempt Taxable
    New Hampshire 0% N/A N/A N/A
    Vermont 6% Exempt Exempt Exempt
    Source: Tax Policy Center, "Sales Tax Rates 2000-2015," accessed September 30, 2015

    Excise taxes

    See also: Excise taxes

    Excise taxes, also known as selective sales or differential commodity taxes, are levied for the sales of specific goods or services. Excise taxes are considered indirect taxes because they are not charged directly to individuals. In most cases, the excise tax is paid by the producer or seller of an item. The cost of the tax is then included in the sale price of the item and passed on to the consumer. The tables below provide excise tax rates for motor fuel, alcohol and cigarettes in Rhode Island and neighboring states. In Rhode Island, excise tax revenues comprised 21.6 percent of total tax collections in 2013.[15][16][17][18]

    Fuel excise tax rates, 2015 (in cents per gallon)
    State Gasoline Diesel Gasohol
    Excise tax Other taxes Total tax Excise tax Other taxes Total tax Excise tax Other taxes Total tax
    Rhode Island 32¢ 1¢ 33¢ 32¢ 1¢ 33¢ 32¢ 1¢ 33¢
    Connecticut 25¢ 0¢ 25¢ 54.5¢ 0¢ 54.5¢ 25¢ 0¢ 25¢
    Massachusetts 24¢ 0¢ 24¢ 24¢ 0¢ 24¢ 24¢ 0¢ 24¢
    New Hampshire 22.2¢ 1.625¢ 23.825¢ 22.2¢ 1.625¢ 23.825¢ 22.2¢ 1.625¢ 23.825¢
    Vermont 12.1¢ 19.87¢ 31.97¢ 28¢ 4¢ 32¢ 18.2¢ 13.77¢ 31.97¢
    Note: For full annotations, see the source below.
    Source: Tax Policy Center, "State Motor Fuel Tax Rates 2000-2011, 2013-2015," accessed September 30, 2015
    Alcohol excise tax rates, 2015 (in dollars per gallon)
    State Liquor Wine Beer
    Tax rate Does general sales tax apply? Tax rate Does general sales tax apply? Tax rate Does general sales tax apply?
    Rhode Island $5.40 Yes $1.40 Yes $0.11 Yes
    Connecticut $5.40 Yes $0.72 Yes $0.24 Yes
    Massachusetts $4.05 Yes $0.55 Yes $0.11 Yes
    New Hampshire See footnote1 N/A See footnote5 N/A $0.30 N/A
    Vermont See footnote1 No $0.55 Yes $0.27 Yes
    1"In 17 states, the government directly controls the sales of distilled spirits. Revenue in these states is generated from various taxes, fees, price mark-ups, and net liquor profits."
    2"General sales tax applies to on-premise sales only."
    3"Rhode Island tax rate scheduled to decrease to $3.75 on July 1, 2015."
    4"Washington privatized liquor sales effective June 1, 2012."
    5"All wine sales are through state stores. Revenue in these states is generated from various taxes, fes, price mark-ups, and net profits."
    Note: For full annotations, see the source below.
    Source: Tax Policy Center, "Alcohol Rates, 2000-2010, 2013-2015," accessed September 30, 2015
    State cigarette taxes, 2015 (in cents per pack)
    State Tax rate National ranking
    Rhode Island 350¢ 3
    Connecticut 340¢ 4
    Massachusetts 351¢ 2
    New Hampshire 178¢ 18
    Vermont 275¢ 8
    Note: For full annotations, see the source below.
    Source: Tax Policy Center, "State Cigarette Taxes, 2015," accessed September 30, 2015

    Corporate income tax

    See also: Corporate income tax

    Corporate income tax is the tax levied by a state on a company's profits. In tax year 2015, Rhode Island levied a 7 percent corporate income tax. The table below lists the corporate income tax rates for Rhode Island and neighboring states in 2015.[19][20]

    Corporate income tax rates, 2015
    State Tax rate Brackets Number of brackets
    Lowest Highest
    Rhode Island 7% Flat rate 1
    Connecticut 9% Flat rate 1
    Massachusetts 8% Flat rate 1
    New Hampshire 8.5% Flat rate 1
    Vermont 6.0 - 8.5% $10,000 $25,000 3
    Note: For complete notes and annotations, please see the source below.
    Source: Tax Foundation, "State Corporate Income Tax Rates and Brackets for 2015," accessed October 7, 2015

    Business tax climate

    In October 2014, the Tax Foundation released a report evaluating business tax systems in the states for fiscal year 2015. The report's authors graded the states by analyzing more than 100 variables in five general tax areas: corporate taxes, personal income taxes, sales taxes, unemployment insurance taxes and property taxes. States were scored on a scale of zero to 10, with a score of zero indicating the worst business tax structure and a score of 10 indicating the best. States were then ranked on a scale of one to 50, with a ranking of one indicating the state with the best business tax climate and a score of 50 indicating the state with the worst.[21]

    In fiscal year 2015, Rhode Island's business tax climate was ranked 45th in the nation. The table below provides scores and rankings for Rhode Island and neighboring states. To access the full report, click here.[21]

    Business tax climate rankings, fiscal year 2015
    State 2014 2015 Change from 2014 to 2015
    Rank Score Rank Score Rank Score
    Rhode Island 45 4.18 45 4.14 0 -0.04
    Connecticut 41 4.49 42 4.47 -1 -0.02
    Massachusetts 23 5.14 24 5.08 -1 -0.06
    New Hampshire 7 6.08 7 6.01 0 -0.07
    Vermont 46 4.15 46 4.11 0 -0.04
    Note: For complete notes and annotations, please see the source below.
    Source: Tax Foundation, "2015 State Business Tax Climate Index," October 28, 2014

    Property tax

    See also: Property tax

    Most often, property tax applies to real estate, although some states levy property taxes on other types of personal property, such as automobiles. Generally speaking, an individual's property tax liability is determined by the tax rate and the tax base, which is "determined by both the assessed value of the property and ... the share of the assessed value that is subject to tax." To learn more about property taxes, including tabulation methods, see this page.[22][23][24]

    Property taxes comprise the lion's share of local government revenues. In 2010, property taxes accounted for 75 percent of the tax revenues collected by local government entities (such as cities, counties, school districts, etc.). States, on the other hand, generate very little revenue from property taxes. Property tax rates can vary substantially from locality to locality within a state.[22][23]

    The table below provides the mean amount of property taxes paid, as well as property tax as a mean percentage of home value, for Rhode Island and neighboring states for 2012.[22]

    Mean property taxes paid per state, 2012
    State Mean property taxes paid Property tax as a percent of home value
    Rhode Island $3,820 1.67%
    Connecticut $5,200 1.88%
    Massachusetts $3,805 1.19%
    New Hampshire $5,230 2.18%
    Vermont $4,328 1.62%
    Source: Tax Policy Center, "Residential Property Taxes in the United States," November 18, 2013

    The table below lists per capita state and local property tax collections for Rhode Island and neighboring states for fiscal year 2012. According to the Tax Foundation, which compiled the data below, Rhode Island ranked seventh in the country in terms of property tax collections per capita.[25]

    State and local property tax collections per capita, 2012
    State Collections per capita Ranking
    Rhode Island $2,234 7
    Connecticut $2,626 3
    Massachusetts $2,061 10
    New Hampshire $2,585 4
    Vermont $2,202 8
    Source: Tax Foundation, "Facts and Figures 2015: How Does Your State Compare?" accessed October 5, 2015

    Estate and inheritance taxes

    See also: Estate and inheritance taxes

    Estate and inheritance taxes are levied on the property of deceased individuals (decedents). Generally speaking, an estate tax is applied to the value of a decedent's property and is paid from the estate before distribution to any heirs. By contrast, an inheritance tax is paid by the heir or heirs of a decedent's assets.[26][27][28]

    Rhode Island is one of 15 states (plus the District of Columbia) that levies an estate tax. In addition, Rhode Island taxpayers are also liable for the federal estate tax. The table below summarizes the estate tax rates for Rhode Island and neighboring states in 2015.[28]

    Estate taxes, 2015
    State Exemption threshold Minimum rate Maximum rate
    Rhode Island $1,500,000 0.8% 16%
    Connecticut $2,000,000 7.2% 12%
    Massachusetts $1,000,000 0.8% 16%
    New Hampshire N/A
    Vermont $2,750,000 0.8% 16%
    Note: For complete notes and annotations, please see the source below.
    Source: Tax Foundation, "Facts and Figures 2015: How Does Your State Compare?" accessed October 5, 2015

    Tax revenues

    Tax collections by source as a percentage of total tax collections in 2013.
    See also: Rhode Island state budget and finances

    The table below summarizes general fund revenue sources for Rhode Island and neighboring states in 2013. All figures are rendered in millions of dollars (for example, $1,500 translates to $1,500,000,000). Per capita figures have not been abbreviated.[29]

    General fund revenue sources, 2013
    State Sales tax Personal income tax Corporate income tax Other taxes and fees Grand total Per capita revenues
    Rhode Island $873 $1,075 $137 $1,239 $3,324 $3,161.17
    Connecticut $3,857 $8,719 $742 $6,049 $19,366 $5,385.31
    Massachusetts $5,164 $12,831 $1,822 $7,352 $27,169 $4,059.42
    New Hampshire $0 $0 $552 $1,731 $2,283 $1,725.03
    Vermont $231 $661 $95 $302 $1,289 $2,057.04
    Source: National Association of State Budget Officers, "State Expenditure Report: Examining Fiscal 2011-2013 State Spending," accessed September 24, 2014

    The table below lists tax collections by source as a percentage of total collections for Rhode Island and neighboring states in 2013.[3]

    Tax collections by source as a percentage of total tax collections, 2013
    State Property tax Sales tax Select sales (excise) taxes Personal income tax Corporate income tax Other taxes
    Rhode Island 0.1% 30% 21.6% 37% 4.9% 6.4%
    Connecticut 0% 23.9% 17.9% 48.4% 3.5% 6.2%
    Massachusetts 0% 21.7% 9.5% 53.9% 7.9% 7%
    New Hampshire 16.9% 0% 39.9% 4.2% 23.3% 15.7%
    Vermont 33.8% 12.1% 22.1% 23% 3.7% 5.4%
    Source: Tax Policy Center, "State Tax Collection Shares by Type 2000-2013," June 20, 2014

    See also

    Footnotes

    1. ↑ 1.0 1.1 1.2 Federation of Tax Administrators, "2014 State Tax Revenue," accessed October 26, 2015
    2. ↑ Brunori, D. (2011). State Tax Policy: A Political Perspective. Washington, D.C.: The Urban Institute Press
    3. ↑ 3.0 3.1 Tax Policy Center, "State Tax Collection Shares by Type 2000-2013," June 20, 2014
    4. ↑ Federation of Tax Administrators, "2014 State Tax Revenue," accessed October 26, 2015
    5. ↑ Investing Answers, "Tax Bracket," accessed September 24, 2014
    6. ↑ 6.0 6.1 Tax Policy Center, "Individual State Income Tax Rates 2000-2015," accessed September 29, 2015
    7. ↑ Tax Foundation, "State Personal Income Tax Rates and Brackets 2014 Update," March 21, 2014
    8. ↑ Tax Policy Center, "What is the personal exemption?" accessed December 14, 2015
    9. ↑ Internal Revenue Service, "3. Personal Exemptions and Dependents," accessed December 14, 2015
    10. ↑ Tax Policy Center, "What is the personal exemption?" accessed December 14, 2015
    11. ↑ Internal Revenue Service, "Topic 409 - Capital Gains and Losses," August 19, 2014
    12. ↑ Tax Foundation, "The High Burden of State and Federal Capital Gains Tax Rates," February 11, 2014
    13. ↑ Tax Policy Center, "Capital Gains and Dividends: How are capital gains taxed?" June 22, 2011
    14. ↑ Tax Policy Center, "Sales Tax Rates 2000-2015," accessed October 2, 2015
    15. ↑ Tax Policy Center, "Excise taxes," accessed October 20, 2014
    16. ↑ Investopedia, "Excise Tax," accessed October 20, 2014
    17. ↑ Tax Foundation, "Excise Taxes," accessed October 20, 2014
    18. ↑ Internal Revenue Service, "Excise Tax," accessed October 20, 2014
    19. ↑ Investopedia, "Corporate Tax," accessed September 24, 2014
    20. ↑ Tax Foundation, "State Corporate Income Tax Rates and Brackets for 2015," accessed October 7, 2015
    21. ↑ 21.0 21.1 Tax Foundation, "2015 State Business Tax Climate Index," October 28, 2014
    22. ↑ 22.0 22.1 22.2 Tax Policy Center, "Residential Property Taxes in the United States," November 18, 2013
    23. ↑ 23.0 23.1 Bankrate, "Property taxes explained," February 3, 2000
    24. ↑ Investopedia, "Property Tax," accessed September 26, 2014
    25. ↑ Tax Foundation, "Facts and Figures 2015: How Does Your State Compare?" accessed October 5, 2015
    26. ↑ About.com, "What's the Difference Between an Estate Tax and an Inheritance Tax?" accessed October 16, 2014
    27. ↑ Internal Revenue Service, "Estate Tax," updated September 29, 2014
    28. ↑ 28.0 28.1 Tax Foundation, "Facts and Figures, 2015," accessed October 6, 2015
    29. ↑ National Association of State Budget Officers, "State Expenditure Report: Examining Fiscal 2011-2013 State Spending," accessed September 24, 2014
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