The bill amends Section 44-30-2.6 of the General Laws in Chapter 44-30, which governs Rhode Island's personal income tax. It introduces an additional tax of three percent (3%) on taxable income exceeding an inflation-adjusted threshold amount, which is set at six hundred forty thousand dollars ($640,000) in 2026 dollars. This additional tax specifically targets the top one percent (1%) of income earners and will take effect for tax years beginning on or after January 1, 2027. The additional tax will apply only to taxable income after all appropriate exemptions and deductions and will not apply to taxable income at or below the threshold amount.

The bill maintains the existing three-bracket personal income tax structure and includes provisions for annual inflation adjustments to the threshold amount in accordance with established procedures. It specifies that the additional tax shall apply to various filing statuses, including married individuals filing joint returns, qualifying widow(er)s, heads of household, unmarried individuals, married individuals filing separate returns, and bankruptcy estates.

Additionally, the bill outlines that the new tax will not apply retroactively to tax years beginning before January 1, 2027, nor to taxable income attributable to prior tax years.

The bill also includes changes to the Rhode Island earned-income credit, gradually increasing it from ten percent (10%) to sixteen percent (16%) of the federal earned-income credit by 2024, and allows for a full refund of excess credits over the Rhode Island income tax for eligible tax years.

Overall, the act is set to take effect on January 1, 2027.

Statutes affected:
2238: 44-30-2.6