S2238 amends Rhode Island’s personal income tax law to add a new top marginal tax on very high earners. Beginning with tax years starting on or after January 1, 2027, it imposes an additional 3% tax on Rhode Island taxable income above an inflation-adjusted threshold set at $640,000 in 2026 dollars. The bill specifies that the surcharge applies only to income above that threshold, is not retroactive, and will be adjusted annually for inflation using the state’s existing cost-of-living methodology.
The bill leaves the existing three-bracket personal income tax structure in place and does not change the base tax rates for most taxpayers. It also retains the current framework for deductions, exemptions, and credits, while making clear that the new surcharge is calculated after applicable deductions and exemptions. The legislation is aimed at the top 1% of filers, according to the bill’s explanation, and is intended to apply only to taxable income, not gross income.
Impact
The bill would amend § 44-30-2.6 of the Rhode Island General Laws, adding a new additional tax on high-income filers and requiring the Division of Taxation to apply annual inflation adjustments to the threshold. It would affect individual income taxpayers, including married filers, heads of household, unmarried individuals, and bankruptcy estates, but only for taxable income above the specified cutoff. The bill does not alter the existing tax brackets for lower and middle incomes, nor does it change the state’s general treatment of deductions, exemptions, or most credits beyond how the new surcharge is layered onto the tax calculation.
Sentiment
Based on the bill text and the absence of recorded committee testimony or votes, the overall sentiment appears to be policy-driven and targeted rather than broadly contentious in the available record. The sponsor list suggests support from multiple senators, and the explanation frames the measure as a narrowly tailored tax increase on the highest-income taxpayers. No opposing arguments, amendments, or vote tallies are provided in the supplied materials, so there is no documented public debate to indicate broader support or opposition.
Contention
The main point of contention likely concerns the creation of a new 3% surcharge on high-income taxpayers and the choice of a $640,000 2026-dollar threshold, which would concentrate the tax burden on the top 1% of filers. Potential critics could object to the higher marginal rate, concerns about competitiveness, or the effect on tax planning and high earners, while supporters would emphasize that the tax is limited to income above the threshold and does not affect most taxpayers. Because no committee transcript or vote history is included, specific objections or endorsements are not documented in the record provided.
Authorizes a retroactive tax credit for tax yr 2026/thereafter/allowing investment tax credits to be passed through to the personal income tax returns of eligible Sub-S corporation shareholders/limited liability company members who meet certain conditions
Increases the state earned-income credit as of January 1, 2026 to seventeen percent (17%) of the federal earned-income credit, not to exceed the amount of state income tax.
Increases the Rhode Island earned-income credit to twenty percent (20%) on January 1, 2026. Such credit would not exceed the amount of state income tax.
Allows an income tax credit for employer contributions to an eligible employee's ABLE account, for a maximum credit of two thousand dollars ($2,000) per employee, per year.