The Greater Providence Chamber of Commerce

Rhode Island Adopts New High-Income Tax in FY2027 Budget

As part of the Fiscal Year 2027 budget proposal, lawmakers have advanced a new tax on high-income earners that would be phased in over three years beginning in 2027. The proposal would impact many business owners whose income is reported through LLCs, partnerships, and S-corporations.

The budget proposal has been approved by the House Finance Committee but must still be considered by the full House of Representatives and the Senate before becoming law.

What Changed?

The approved budget includes a new surtax on high-income earners that will be implemented gradually over three years. While the phased approach differs from the original proposal, the end result remains the same: a permanent increase in taxes on a segment of Rhode Island taxpayers.

Many of those impacted are not simply individual wage earners. According to research from the Rhode Island Public Expenditure Council (RIPEC), a significant share of high-income taxpayers report business income through pass-through entities such as S-corporations, partnerships, and LLCs. These are often the small and mid-sized businesses that drive investment, job creation, and economic activity throughout Rhode Island.

Why This Matters

The Greater Providence Chamber of Commerce believes Rhode Island’s long-term economic success depends on growing the state’s tax base through business attraction, retention, expansion, and job creation—not through increasing taxes on employers, entrepreneurs, investors, and business owners.

Rhode Island competes every day with neighboring states for talent, investment, and economic opportunity. Yet despite recent progress, the state continues to rank near the bottom nationally in business competitiveness, including rankings that place Rhode Island 48th in the nation for business climate. At a time when we should be working to improve our competitive position, this policy risks moving Rhode Island in the wrong direction.

Numerous economic studies have identified ongoing challenges facing Rhode Island, including a high tax burden, aging infrastructure, population loss, workforce shortages, and slow economic growth. These factors already make it more difficult for the state to attract and retain businesses, talent, and private investment.

The Chamber also questioned the need for a new tax increase given that state revenue estimates projected an additional $233 million in revenue beyond prior forecasts. At a time of budget surplus, policymakers should be focused on maximizing the effectiveness of existing resources and strengthening Rhode Island’s competitive position.

The Chamber remains concerned that this new tax sends the wrong message to current and prospective employers. Businesses making decisions about where to locate, expand, and invest seek stability, predictability, and a commitment to economic growth. Policies that increase uncertainty can make Rhode Island less competitive at a time when other states are actively working to attract businesses and talent.

Simply put, economic growth creates opportunity. More business investment leads to more jobs, higher wages, stronger communities, and greater tax revenue to support public priorities. Rhode Island’s future depends on creating an environment where businesses can grow, invest, and succeed. The Chamber remains committed to advocating for policies that strengthen Rhode Island’s competitiveness, attract new investment, support employers, and create economic opportunity for all Rhode Islanders.

GPCC Official Statement

“We remain opposed to the House budget proposal. The end result is as we feared—an unnecessary tax on Rhode Islanders, now simply phased in over a three-year period versus one. This sends an incredibly poor message for economic development and job growth in Rhode Island—something we at the Greater Providence Chamber of Commerce have worked hard to reverse. Sadly, in a year of budget surplus, this is an extremely tone-deaf budget for Rhode Islanders.”