Governor Dan McKee released his FY2027 budget last week and it includes a troubling tax hike proposal that could harm Rhode Island small business and the state’s overall competitiveness. His plan calls for a new 8.99% tax bracket on income over $1 million, a so-called millionaire’s tax.

While McKee’s tax hike claims to target wealthier earners, many smaller businesses could be impacted as well. The vast majority of small businesses are pass through entities and pay their taxes as individuals. If that business has earnings over $1 million it will be taxed at a higher rate with the 3% surtax. That will mean less money to invest in property, facilities, inventory, equipment, and their workforce.

Another way the tax hike may impact Rhode Island employers is when an owner decides to sell the business and retire. NFIB understands many small business owners rely on the sale of the business as their retirement nest egg, and over time the value of their business has hopefully increased. A pass through business could now be taxed at the higher rate, depleting what is left for your retirement.

NFIB State Director Christopher Carlozzi reiterated these points to WPRI news following the Governor’s announcement.

Outside of the tax hike proposal, McKee wants to roll back last year’s gas tax increase. While a laudable goal, it was legislative leaders that inserted it into last year’s budget that was approved without McKee’s stamp of approval.

Additionally, McKee wants to find ways to make energy more affordable for Rhode Island residents and businesses, a top priority for NFIB this legislative session.

If you have not yet done so, we urge you to take a moment to contact your state officials urging them to oppose Governor McKee’s tax hike plan.