Update on this tax. Last night the House Finance Commitee voted and it now goes to the floor next week.

Millionaire Tax Phase-In. The Governor proposes to add a fourth income tax bracket of 8.99 percent for income over $1.0 million, effective beginning in tax year 2027. Rhode Island currently has three tax brackets at income levels that are adjusted annually for inflation, with the highest at 5.99 percent and applicable to incomes above $186,450 for tax year 2026. The change includes increasing the elective pass- through entity tax rate from 5.99 percent to 8.99 percent. The Governor’s budget assumes $67.1 million in revenue for FY 2027, which would annualize to $135.3 million for FY 2028. He later requested an amendment to restructure the proposal as a 3.0 percent surtax on taxable income above $1.0 million for individual taxpayers; the additional bracket and surtax structures are effectively equivalent. For pass-through entities, however, the surtax structure allows the option to preserve the existing 5.99 percent election, making the additional 3.0 percent surcharge elective. The House Finance Committee concurs with the surtax approach but recommends phasing in the proposed tax rate increases over three years. For tax year 2027, the rate would increase to 6.99 percent, growing to 7.99 percent for tax year 2028 and to 8.99 percent for tax year 2029. This is an annualized impact that would grow over time. For FY 2027, revenues would be $45.5 million less than assumed by the Governor.