Will rich Rhode Islanders flee because of a millionaires tax? Don't believe it, advocates say.

Yahoo

05-03-2025

Will a progressive income tax cause millionaires and billionaires to flee Rhode Island in search of tax-friendlier pastures elsewhere? No, according to a new analysis from the Economic Progress Institute. (Getty image)
Advocates and lawmakers burst into applause and cheers as labor organizer Pat Crowley pulled open the lapels of his blazer to reveal his T-shirt emblazoned with 'Eat the Rich.'
The crowd's reaction at a State House event Tuesday was much more subdued when Alan Krinsky narrated a set of projected slides filled with text and charts. The findings might not be as crowd-rousing as Crowley's shirt slogan, but Krinsky, director of research and fiscal policy for the Economic Progress Institute (EPI), hopes the data will be equally effective in persuading lawmakers to finally approve a higher tax on the state's richest residents.
The 26-page policy briefing refuted arguments that a progressive income tax will cause millionaires and billionaires to flee the state in search of tax-friendlier pastures.
'The evidence clearly shows that the fear of substantial migration out of Rhode Island as a result of increasing the top tax rate on millionaires and other high-income filers is just that, a fear, and a completely unwarranted fear, as such a mass exodus in response to changes in top marginal tax rates is without historical precedent,' the report states.
And separating fact from fiction has never been more important as state leaders stare down a projected $220 million deficit for the upcoming fiscal 2026 budget, combined with grave federal funding cuts.
'We're living during times where there's a lot of fear,' Weayonnoh Nelson-Davies, EPI's executive director, told the standing room-only crowd gathered in the Senate lounge Tuesday. 'This myth has been held over our heads in Rhode Island for quite a while. Stop spreading the myth.'
The myth busting comes on the heels of companion bills introduced in the Rhode Island General Assembly last month by Rep. Karen Alzate, a Pawtucket Democrat, and Sen. Melissa Murray, a Woonsocket Democrat, seeking to tax the state's top earners more.
A 3% surtax on the 5,700 state income tax filers who earn above $625,000 a year (based on 2025 data) would bring in $190 million annually for the state, according to EPI's analysis.
Murray and Alzate have unsuccessfully floated similar tax proposals in previous years, with business leaders insisting the policy will cost the state more than it brings in while forcing rich residents to move, taking their wealth, and their economic contributions to the state, with them.
But high earners across the country, including in Rhode Island, are far less likely to move than their lower-income counterparts. From 2016 to 2022, Rhode Island has grown its share of residents who earn above $200,000 a year. The numbers of residents who earn less than $200,000 have declined in that same time.
Historically, the state's population rarely fluctuates up or down more than 1% a year, including pre-2010, when Rhode Island lawmakers reduced the top income tax rate from 10% to 5.99%, the report found.
The few rich residents who move don't necessarily head for states that have lower income taxes. In general, state tax policies have little sway over where top earners decide to live; instead, their migrations are influenced more by work, family and climate, according to research by the Center on Budget and Policy Priorities cited in the EPI report.
'The difference in the top marginal rates of state income taxes is not a significant impact on their standard of living,' Krinsky said. 'They can afford to live where they want to.'
Just look at Rhode Island's northern neighbor. Massachusetts voters in 2022 approved a ballot measure adding a 4% surtax on income over $1 million. Since the millionaires tax, also known as the Fair Share Amendment, took effect in 2023, the Commonwealth has brought in more than $2 billion in revenue from the tax each year — exceeding estimates even by tax supporters.
We're living during times where there's a lot of fear. This myth has been held over our heads in Rhode Island for quite a while. Stop spreading the myth.
– Weayonnoh Nelson-Davies, executive director, Economic Progress Institute
'It is quite possible that a few Massachusetts millionaire filers have left the state, and for these people, the state would indeed lose the tax revenue they would have paid on their taxable income below a million dollars,' the report acknowledges. 'However, the state would not be collecting over $2 billion in additional revenue annually if the departure of a few millionaires was causing a serious loss of revenue.'
And that windfall of extra cash has helped pay for crucial programs in Massachusetts that many Rhode Island lawmakers would like to replicate: free breakfast and lunch for public school students, regardless of income; free fare on public transportation; money for critical road and bridge repairs and scholarships for higher education, to name a few.
'These are all the things we know we need, all these great proposals we would love to fund, but have to look our constituents in the eye year after year after year and say 'I'm sorry, this is such a great proposal and we know we need this so badly, but we just don't have the money,' said Murray. 'The $190 million is not going to solve all our problems, but it would go a long way.'
Not only does the tax create a new, sustainable source of revenue, it also may prevent the state from losing a far more mobile segment of its population: the working class.
Rhode Island, like much of the Northeast, has seen its population shrink in recent years, in part because more people are leaving the state than moving in. But it's not millionaires who are on the move so much as young working class families being priced out of housing, transportation, and other costs, said Andrew Farnitano, former spokesperson for the Raise Up Massachusetts campaign that rallied support for the 2022 ballot question in Massachusetts.
'I hate to break it to you, but multi-millionaires are not renting U-Haul trucks to move out,' Farnitano said at the event Tuesday, referencing commercial moving data from U-Haul often cited by income tax detractors.
The bills have also received the backing of the Revenue for Rhode Islanders Coalition, which represents more than a dozen state labor, education, child care, and policy groups.
House Speaker K. Joseph Shekarchi has remained noncommittal on the income tax bills, though he noted the budget challenges the state is facing this year in an emailed statement Tuesday.
Senate President Dominick Ruggerio previously indicated he would not support any tax increases, a position which remains generally unchanged though he will consider the specifics of the bill during the hearing process, Greg Paré, a Senate spokesperson, said in an email Tuesday.
Murray, however, remained optimistic, noting the attendance of Senate Majority Leader Valarie Lawson at the policy event Tuesday.
Hearings on the companion bills had not been scheduled as of Tuesday.
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