In an effort to increase education funding in Rhode Island, two state lawmakers have introduced a tax reform plan that would raise taxes on residents earning more than $500,000 annually. The new tax bracket would add 1 percentage point to the 5.99 percent top rate for income earned higher than $500,000. An incremental amount of the new revenue would be directed to a designated account for funding K-12 education
Although some supporters of so-called millionaire taxes argue large-scale relocation by wealthy taxpayers is not likely to occur, the negative effect of Maryland’s millionaire tax provides a stark example of what could take place in Rhode Island. In 2009, Maryland enacted a millionaire tax projected to raise an additional $106 million per year. Instead of providing the anticipated revenue increase, the number of Marylanders reporting incomes of $1 million or more fell by one-third just one year after the tax became law.