2015-04-02 / Opinion

All Residents Should Share Tax Burden

To the Editor:

The second home tax offered by Governor Gina Raimondo begs the question, “Who is not paying their fair share of taxes in Rhode Island?” Unfortunately, the governor’s proposal does not answer that question in a satisfactory way.

The governor’s proposal relies on a selective increase in the property tax for those owners of second homes whose value is in excess of $1 million. By its very nature, any property tax is a regressive tax, taxing what individuals own, rather than what they earn. It is not predicated on those owners' ability to pay the tax, but on the property’s value. As many older homeowners in Rhode Island are already aware, as the years pass, the value of their property increases and their property taxes go up, even though their annual income has remained the same or decreased. When that tax burden reaches an unacceptable level, they start to look for somewhere else to live. On Aquidneck Island, these homes are often sold to out-of-state residents with large incomes who will use them as vacation homes, not as permanent residences.

The problem with second homes that are occupied only part time is that they deprive the state of income.

They do this in two ways.

First, if the second home is in Florida, and that person occupies the Florida house for six months and one day during any year, that person is not liable for Rhode Island income taxes. Many residents of Rhode Island take advantage of this. It’s almost as if part of the cost of their Florida home is being paid for by the savings of not paying Rhode Island income taxes. The result is that the tax burden rises for all full-time residents of Rhode Island. These taxpayers are, in effect, subsidizing the Florida second homes of Rhode Island’s part-time residents.

Second, many of the second homes in Rhode Island remain vacant during those six months. If they were offered for rent, the renters would be using local services, paying sales taxes, and if employed, paying state income taxes. This would increase the stream of revenue to the state, instead of receiving nothing while the house remains vacant. The tax burden on all state residents would be reduced.

The idea of raising revenue by a property tax surcharge on expensive second homes does not really address the underlying issues of fairness and equity in Rhode Island’s tax system. What is needed is a change that requires all residents of Rhode Island, full or part time, to contribute to the state’s tax base.

If a person lives in Rhode Island one month out of the year, and their state income tax would have been $12,000 if they lived here year round, then they should pay an income tax of $1,000. If they live here six months, they should pay an income tax of $6,000. It places the burden on those with the ability and obligation to pay state income taxes.

Raimondo’s proposal states: “Owners of non-owner occupied properties must be required, through the state’s power to tax, to pay a fair share of the cost of providing certain essential state services to protect the public health, safety and welfare.”

The “fair share” should be a shared burden, not just applied to one class of second home-owners. Progressive income taxes are a broad-based way to assure the state of the revenues required to keep the state financially healthy. The obligation should be spread across the whole spectrum of those who benefit from the state’s services.

Lawrence Frank

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