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 establishes a phased reduction of personal income tax rates, reducing the rates by an aggregate ten percent (10%) over five taxable years, beginning January 1, 2027. The reductions will be implemented in equal annual increments of two percent (2%) of the rates in effect for the taxable year 2026. The new tax brackets will be as follows:

- For the taxable year beginning on or after January 1, 2027: 3.68% (first bracket), 4.66% (second bracket), 5.87% (third bracket).
- For the taxable year beginning on or after January 1, 2028: 3.60%, 4.56%, 5.75%.
- For the taxable year beginning on or after January 1, 2029: 3.53%, 4.47%, 5.63%.
- For the taxable year beginning on or after January 1, 2030: 3.45%, 4.37%, 5.51%.
- For the taxable year beginning on or after January 1, 2031: 3.38%, 4.28%, 5.39%.

The income thresholds applicable to each tax bracket will continue to be adjusted annually for inflation as provided by law.

The bill includes provisions for fiscal oversight, requiring the director of revenue to review total general revenues for the immediately preceding fiscal year before implementing each scheduled annual rate reduction. If the director determines that total general revenues materially underperformed enacted revenue estimates, the director may recommend delaying the scheduled rate reduction for the subsequent taxable year. Any delayed rate reduction will not be forfeited and will take effect in the first taxable year following a determination that revenues have stabilized, unless otherwise enacted by the general assembly.

Additionally, the bill mandates a legislative review by January 15, 2029, where the director of revenue will submit a written report evaluating the fiscal impact of the phased rate reductions, changes in personal income tax collections by bracket, observed taxpayer behavior and economic trends, and recommendations regarding the continuation of the phase-in schedule.

The bill also includes a severability clause, stating that if any provision of the subsections related to the phased reduction, fiscal oversight, or legislative review is held invalid, such invalidity shall not affect other provisions or applications that can be given effect without the invalid provision.

Statutes affected:
2672: 44-30-2.6