Ask An Expert: RI Taxes

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In this first edition of Ask An Expert, I am sitting down with local CPAs to unpack Rhode Island’s tax structure, a topic that sounds dry until you realize how much it affects whether people stay in Rhode Island, start businesses here, or retire somewhere else.

As someone who’s spent most of his career helping to grow businesses and create jobs here in Rhode Island, I’ve seen firsthand how taxes can tip the scales, sometimes in our favor, sometimes not.

Our state’s entrepreneurs, small business owners, and retirees contribute so much to our communities. They create jobs, donate to nonprofits, coach youth sports, serve on town committees, and support local causes.

When we lose them to other states, we don’t just lose tax revenue, we lose neighbors, mentors, and community leaders.

So I wanted to start a series that demystifies how our state tax system really works, what’s fair, what’s outdated, and what might be holding us back.

Below are ten questions I’ll be asking Rhode Island accountants and business experts. I’ve also shared my own take, not as a tax professional, but as a lifelong Rhode Islander who wants our state to stay competitive, compassionate, and economically strong.

• 1️⃣ How does Rhode Island’s tax structure compare to Massachusetts and Connecticut?

  Mark’s Take:
  
  We’re often caught in the middle. We are not the highest-taxed state, but not the most competitive either.

  Massachusetts has a lower flat income tax (5%) and a higher estate tax threshold.

  Connecticut has more regional incentives for businesses.

  Rhode Island’s mix of income, sales, and property taxes can make it tough for both startups and retirees to stay planted.

  We need to streamline and simplify while maintaining revenue for education and infrastructure.

• 2️⃣ Which aspects of our tax system most affect a company’s decision to stay or leave?

  Mark’s Take:
  
  Predictability is key. Business owners can plan for high taxes, but not for uncertainty.
  
  Frequent changes, complex filing rules, and high property taxes in certain towns push people to relocate.
  
  Simplifying business tax filing, and rewarding local reinvestment, would make a huge difference. text goes here

• 3️⃣ What is the estate tax unified credit, and why does it matter?

  Mark’s Take:
  
  Rhode Island’s estate tax exemption (around $1.7 million) is far below Massachusetts ($2 million) and way below the federal level ($13.6 million).
  
  That means lifelong business owners who built something from scratch can end up selling or moving assets out of state just to avoid penalizing their heirs.
  
  Adjusting our unified credit would help keep those families, and their philanthropy, right here in Rhode Island.

• 4️⃣ What happens if we raise our estate tax threshold?

  Mark’s Take:
  
  We’d probably see more retirees and business owners stay.
  
  People who built local companies want to pass them down, not sell to out-of-state buyers.
  
  The cost to the state in lost estate tax revenue could easily be offset by the ongoing income, property, and sales taxes those residents continue paying, not to mention their donations to nonprofits.

• 5️⃣ Beyond income and estate taxes, which taxes influence where people live or do business?

  Mark’s Take:
  
  The “hidden” ones like the gas tax, meals and beverage tax, and hotel tax add up, especially for service-based businesses and tourism towns like ours.
  
  If you run a small inn, restaurant, or charter business, every fee matters.
  
  We should benchmark those rates annually against neighboring states and adjust if we’re out of sync.

• 6️⃣ How could we make it easier for small and family-owned businesses to reinvest locally?

  Mark’s Take:
  
  Offer real incentives for reinvestment, not just big corporate tax breaks.
  
  Let small businesses deduct more for local hiring, apprenticeships, or green upgrades.
  
  Streamline permitting and reduce duplicative fees that slow growth.
  
  Reward the businesses that stay and hire here.

• 7️⃣ Are our current incentives for startups and new businesses competitive?

  Mark’s Take:
  
  They’re improving, but we still lag behind Massachusetts in tech and innovation funding.
  
  Rhode Island should expand grants and credits tied to job creation, R&D, and workforce training.
  
  Investing in startups isn’t just economic development. It’s about keeping our graduates here after college.

• 8️⃣ Do our hotel and meals taxes strike the right balance?

  Mark’s Take:
  
  Tourism keeps our coastal economy alive. Visitors expect reasonable prices, not hidden surcharges.
  
  If we push hotel or meals taxes too high, vacationers notice.
  
  I’d favor a balanced approach. Keep rates stable, but ensure revenue goes back into coastal infrastructure, tourism marketing, and environmental protection.

• 9️⃣ How significant is the impact of the gas tax and vehicle fees on business?

  Mark’s Take:
  
  They hit tradespeople, delivery drivers, and commuters hardest. The people who can’t work remotely.
  
  If we want to stay affordable for working Rhode Islanders, we need to be mindful of how these cumulative costs add up.
  
  Investing in better transit and fuel-efficient fleet programs can help offset that burden.

• 🔟 If you could make one structural change to strengthen Rhode Island’s economy, what would it be?

  Mark’s Take:
  
  Create a “Competitiveness Index” that automatically reviews our tax rates, fees, and incentives every two years against neighboring states.
  
  That’s how we keep good people, good businesses, and good jobs right here at home.

Closing Thought

Taxes aren’t just numbers. They reflect our values and priorities. The goal isn’t to be the cheapest state. It is to be the most competitive.

The only way to invest in education, infrastructure, and opportunity is to not drive out the very people who make those investments possible.