It’s all about property: RIPEC study finds total tax burden down, property tax up

WHILE THE OCEAN STATE has made progress on lowering its income tax burden recently, it has relied increasingly on property taxes to cover expenses, with its national ranking now near the bottom. For a larger version of this table, CLICK HERE.
RHODE ISLAND derives its revenue disproportionately from property taxes when compared with the rest of the United States. For a larger version of this chart CLICK HERE.
Posted 7/20/10

PROVIDENCE – Rhode Island continued its slide down the ranking of states with the highest tax burdens, although it hasn’t fallen too far, according to an annual report by the Rhode Island Public Expenditure Council.

Based on fiscal 2008 U.S. Census figures, the Ocean State ranks No. 17 in state and local tax burden per $1,000 of personal income, down from 15th a year earlier and 11th back in 1998, said RIPEC’s “How Rhode Island Compares” study released Tuesday.

At the same time, however, the business-backed fiscal watchdog said Rhode Island has become increasingly reliant on property taxes. The average property tax burden of $48.35 per $1,000 of personal income ranked the state No. 5 in the country, one slot higher than it was a decade earlier.

“As in past years, Rhode Island continues to rely more on property taxes to support state and local government than the rest of the country,” RIPEC said. “Over the years, the State has made policy choices that, while successfully reducing resident’s total tax burdens have resulted in an increased reliance on the property tax.”

According to RIPEC, the tax burden in Rhode Island fell slightly from 1998 to 2008, from $115.35 per $1,000 of personal income to $114.18. And on a per capita basis, total state and local government tax collections went from $3,120 in 1998 (12th in the nation in that category) to $4,607 in 2008 (13th).

The tax burden in Massachusetts, meanwhile, sank from $110.48 per $1,000 of personal income in 1998 to $104.61 in 2008, pushing the Bay State from 16th in the country to 34th. By comparison, Connecticut went from No. 7 ($121.31) in 1998 to No. 12 ($117.99) in 2008.

Alaska ($348.51 per $1,000 of personal income) posted the highest tax burden in the United States based on 2008 figures, according to RIPEC. South Dakota had the lowest ($84.85).

When it comes to individual income tax collections, the RIPEC report said Rhode Island compared favorably with other states. At $25.58 per $1,000 of personal income, Rhode Island ranked 29th in the nation, while Massachusetts ($38.45) ranked third and Connecticut ($38.30) ranked fourth.

Rhode Island also appeared further down the ranking in another category, too. Its general sales tax collection rate of $19.84 per $1,000 of personal income placed the state 38th in the country.

But RIPEC said the Ocean State’s better showing in those categories came at the expense of a higher property tax burden.

“Between FY 2007 and FY 2008, both individual income tax collections and general sales tax collections as a share of personal income declined while property tax collections have increased,” RIPEC said. “As a result, property taxes in the state accounted for 42.3 percent of total tax collections in FY 2008, compared to 41 percent the year prior.”

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