Maine, R.I. Diverge on Income Taxes


New Englanders have been talking taxes this week, and coming to different conclusions.

In Rhode Island, Republican Governor Don Carcieri on Wednesday (June 9) signed into law a sweeping legislative plan that reduces income taxes for most residents, but changes deductions and tax breaks in an attempt to keep revenues stable.   "It's not an overhaul," former state Revenue Director Gary Sasse told The Providence Journal last week . "It's like trading the car in: We have a new car."

Rhode Island approved the change to become more competitive with Connecticut and Massachusetts, which have lower top income tax rates. The new law — which cleared the General Assembly on Friday (June 4) without a single dissenting vote — reduces the top income tax rate in Rhode Island from 9.9 percent to 5.99 percent, making up the revenue in part by reducing deductions and exemptions for high earners. The state Office of Revenue Analysis concluded that the plan will reduce taxes for about 60 percent of resident taxpayers while increasing them for about 19 percent. About 21 percent will see no change.

Contrast Rhode Island's action to what happened in Maine on Tuesday (June 8), when voters soundly rejected a legislatively approved tax-reform package that The Wall Street Journal last year hailed as " the Maine Miracle ." The plan, which was signed into law by Democratic Governor John Baldacci, reduced the top income tax rate from 8.5 percent to 6.5 percent for residents earning less than $250,000, while replacing the revenue with a broader sales tax and a higher tax on meals and lodging.

Voters, however, were in no mood for the switch, as the Bangor Daily News reported , surprising at least one supporter of the plan in the legislature. "I never thought I'd see the public vote to raise their own taxes," state Senator Joe Perry, a Democrat, told the paper.

Editor ' s note: An earlier version of this story incorrectly said in the headline that New Hampshire had made tax changes. Rhode Island made the changes.



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