Latest news with #2025StateTaxCompetitivenessIndex
Yahoo
9 hours ago
- Business
- Yahoo
Rhode Island should not follow Massachusetts' tax mistakes
Eight ducklings follow their mother in Nancy Schön's 'Make Way for Ducklings' statues in Boston Common. Rhode Island would be wise not to follow Massachusetts when it comes to taxing high earner, according to the Tax Foundation. (Photo by Kyle Klein/Meet Boston) Rhode Island lawmakers are debating raising the state's top income tax rate. Though billed as a tax hike on high earners, the consequences would manifest across the state's entire economy — creating a risk that Rhode Island will tax its way into uncompetitiveness. The two identical bills — H5473, sponsored by Rep. Karen Alzate, a Pawtucket Democrat, in the House and S329, sponsored by Sen. Melissa Murray, a Woonsocket Democrat, in the Senate — would raise the state's top marginal individual income tax rate from 5.99% to 8.99% on income above approximately $625,000 (in 2025 dollars), adjusted for inflation. Though structured as a surtax, this proposal effectively creates a fourth income tax bracket, and one that doubles down on the marriage penalty that already puts married couples at a disadvantage compared to single filers. It erodes whatever tax advantage Rhode Island currently has against higher-tax peers elsewhere in New England. If enacted, Rhode Island would have the eighth highest top marginal state individual income tax rate in the country (excluding the District of Columbia), up from the 14th highest currently. Millionaire's tax proposal is getting a warm reception from new R.I. Senate leadership Had these changes been in effect last year, Rhode Island would have clocked in on Tax Foundation's 2025 State Tax Competitiveness Index at 43rd overall, down from its current rank of 39th. But a poor ranking shouldn't be the only deterrent to lawmakers who are on the fence about this proposal. Small businesses would be among the biggest losers under this tax increase. In 2022, over half of Rhode Island individual income tax filers with adjusted gross income exceeding $500,000 had income or losses from a pass-through business. Such businesses are often small stores or family operations that fuel their communities' Main Streets. This tax hike would make it more difficult for businesses to stay afloat, forcing many to raise prices, lay off employees, or move out of state to escape an increasingly punitive tax climate. New investment, likewise, would be more difficult to attract since Rhode Island would no longer be a relatively tax-friendly beacon in the Northeast. Currently, Rhode Island outcompetes Connecticut, Massachusetts, New York, New Jersey, and Vermont in tax structure, and Massachusetts' recent tax increase gives Rhode Island another opportunity to position itself as a superior competitor. Instead, proponents of this tax increase seem eager to imitate their neighbor's mistake. Massachusetts, in 2023, abandoned the state's previously enviable flat income tax by imposing a similar surtax. The impacts didn't take long to manifest. According to recent Census data, Massachusetts saw among the highest rates of net outbound migration in the country in fiscal years 2023 and 2024. And at a time when uncertainty stemming from White House orders is putting additional strain on businesses, millionaire's taxes are a strong deterrent to entrepreneurs and businesses with slim profit margins. Still, some try to say tax hikes don't matter or that this data is overblown. Some believe Massachusetts has been impervious to the adverse economic consequences states like California, New York, and Washington experienced when they raised taxes on high earners, pointing to higher-than-expected revenues from the state's new tax on high earners. But Massachusetts is not defying gravity. Years of stock market gains have boosted income for high earners across the country, and those income increases are more than enough to obscure the outmigration and reduced investment caused by the higher tax. When, inevitably, those gains subside, Massachusetts will face the realities created by its high taxes. Similarly, a report from the Institute for Policy Studies (IPS), for example, claims Massachusetts has 'seen tremendous growth in the number of people with more than $1 million in total wealth since raising taxes on higher earners.' The IPS study, unfortunately, is deeply flawed. To begin, it only looks at 2018-2022 — a period when inflation surged and incomes grew rapidly across the country (up almost 12% in nominal terms). Not to mention, a time when Massachusetts didn't have a millionaire's tax. But even conceding that overall wealth grew during that period, IPS gives no context to Massachusetts' performance, which is quite poor compared to the national average. Every state saw an increase in total millionaires after the pandemic, but Massachusetts' 36% increase from 2018-2022 was the fifth lowest in the country. Some states saw triple-digit increases. This raises the question: Why are Rhode Island lawmakers using this legislative session to try and emulate Massachusetts instead of trying to outcompete them? Rhode Island should take this opportunity to distinguish itself from the rest of New England by resisting harmful tax increases and instead reinforcing its current position as a more attractive alternative to its ultra-high-tax neighbors. SUBSCRIBE: GET THE MORNING HEADLINES DELIVERED TO YOUR INBOX
Yahoo
25-03-2025
- Business
- Yahoo
10 States Where Taxpayers Have the Most Write-Offs
Where you live can have a direct impact on your tax burden. While federal tax deductions remain consistent nationwide, state-level tax write-offs can impact what you pay in taxes. If you itemize rather than take the standard deduction — $14,600 for individuals and $29,200 for joint filers for the 2024 tax year — you can take advantage of these write-offs to reduce your taxable income. Check Out: Find Out: Here's what you need to know about tax write-offs and where Americans write off the most in taxes. Tax laws can vary drastically due to variations in tax laws, cost of living, and the types of credits and deductions available. According to the Institute on Taxation and Economic Policy (ITEP), 33 states and Washington, D.C., allow a broad category of itemized deductions. This includes deductions for charitable gifts, home mortgage interest, medical expenses, certain state and local taxes paid, and other expenses. State itemized deductions generally follow federal law, ITEP noted, but nearly every state makes significant changes to deductions available or the extent to which they allow certain deductions. In most cases, higher-income taxpayers are more likely to opt for itemization than lower- and middle-income taxpayers. Read Next: SmartAsset uncovered where taxpayers have the most write-offs using IRS data for the 2022 tax year. Here are the top 10 states and the average itemized deduction amount. Wyoming: $121,922 South Dakota: $66,804 Nevada: $59,492 Arkansas: $58,234 North Dakota: $56,945 Florida: $56,217 Oklahoma: $51,668 New York: $47,787 Texas: $47,195 Utah: $46,387 Wyoming came in first, with an itemized deduction amount nearly double that of second-place South Dakota. Wyoming's tax system also ranked first overall on the Tax Foundation's 2025 State Tax Competitiveness Index. Wyoming does not tax individual or corporate income, but it does have low capital stock tax for businesses, without a maximum payment, according to the Tax Foundation. Taxes are low, and the structure of the state's tax code means most taxes are imposed on businesses. SmartAsset also found that Maryland, which didn't make the top 10, has the most households itemizing deductions (20% of households), with an average deduction of $32,408. Although Utah was in 10th place, the state had the highest average tax credit use among the top 10. The average tax credit was $1,159 in Utah. The state's average itemized deduction was $46,387. More From GoBankingRates6 Reasons Your Tax Refund Will Be Higher in 2025 7 Tax Loopholes the Rich Use To Pay Less and Build More Wealth How Much Money Is Needed To Be Considered Middle Class in Every State? This article originally appeared on 10 States Where Taxpayers Have the Most Write-Offs Sign in to access your portfolio
