GOVERNMENT AFFAIRS

Major Tax Reform, But Continuing Budget Challenges Highlight 2010 Assembly Session

Significant changes to the Rhode Island's income tax structure were achieved in the final days of the 2010 session of the General Assembly. 

These reforms were made possible, in part, by the diligence and persistence of Society members Mary Bernard, Cap Willey, Pat Thompson, David Morganelli and the RISCPA Tax Committee over the course of several years.

Highlights of the new structure include dropping the state’s top tax rate from 9.9 percent to 5.99 percent, making Rhode Island much more competitive with its neighbors. The number of tax brackets will be reduced to three while itemized deductions will be replaced with a large standard deduction of $15,000 for those filing jointly ($7,500 for individuals).

RISCPA President Arthur Lambi, Jr. led other Society members at a House Finance Committee hearing May 19 to testify on behalf of the reforms, while opposing other measures that could slow economic recovery.  

The state’s budget picture was not without some black clouds, however, as the state entered its new fiscal year on July 1.  Aid to municipalities and school districts was cut by approximately $150 million in the new state budget.  In addition, the exemption for the vehicle excise taxes, which stood for several years at $6,000 of a vehicle’s value, was reduced to cover only the first $500 of value. This could mean that owners of older vehicles might owe their city or town more money if the communities decided to levy the tax.

Further, Rhode Island was one of 30 states facing potential budget deficits when the U.S. Senate failed to approve an anticipated increase in Medicaid assistance.  Rhode Island’s budget for FY2011 included an expected $108 million, which is now unlikely to materialize because of the Senate action.

“The tax reforms are a tremendously hopeful sign,” Lambi said.  “But the state’s long term budget problems remain.”