Rhode Island Millionaires Surtax Passes Senate, Goes to Governor

Rhode Island’s legislature passed a new 3% surtax on personal annual income over $1 million as part of a budget bill that now awaits the signature of Gov. Dan McKee (D), who endorsed a millionaires tax in January.

Lawmakers in the state Senate voted 32-6 late Tuesday to pass a $15.2 billion budget bill (H 7127) that included the new tax. The state House passed the budget measure 65-10 last week.

McKee’s office didn’t respond to requests for comment on whether he’d sign the surtax plan. But the governor, who faces a tough Democratic primary election later this year, called for such a tax to help fill a hole in the state’s budget and offset other measures that would benefit lower-income residents.

• The surtax was a compromise plan first unveiled by House leaders May 29. The proposal phases in the additional tax—starting with 1% in tax year 2027 and rising to 3% by 2029—to eventually bring the state’s top tax bracket to 8.99%. The state projects an additional $142 million in annual revenue when fully implemented.
• Progressive groups wanted a 3% surtax on people making $640,000 annually—which they dubbed a tax on the “top 1%" of earners in the state. Business groups strongly opposed any new taxes on high earners, arguing those people could move away.
• Rhode Island would join Massachusetts, Maine, Hawaii, Washington, and other Democratic-led states across the country that have taxed millionaires to generate new sources of revenue.