Rhode Island's taxes are among the most regressive in the nation, and our state's school funding structure - or the effective lack thereof - is to blame. An increased income tax tied to decreases in local property taxes would make our tax code more fair and solve the school funding dilemma that plagues mayors, councils and school boards across our state.
According to a 2003 study by the Institute on Taxation and Economic Policy, Rhode Island is fifth-harshest in its taxation of the poor, with tax structures having grown significantly more regressive since the mid-1990s.
The study shows 8.6 percent of the 2002 incomes of the wealthiest 1 percent of Rhode Island households going to state and local taxes, down from 10.7 percent in 1996. The next-wealthiest 4 percent were paying 9 percent of their incomes, down from 10.2 percent. Meanwhile, the burden on middle-class and poorer Rhode Islanders is higher, and largely unchanged since 1996, with the poorest fifth losing 13 percent their incomes to state and local taxes.
This shift is the result of a declining progressive income tax and increased regressive municipal property taxes. The trend towards higher regressivity has likely continued since 2002, as property taxes have shot up in individual cities and towns.
This trend is not an accident - it is the consequence of consistent, conscious underfunding of our schools by Gov. Donald Carcieri '65 and that portion of the legislature that supports, or declines to actively oppose him. It is driven by the misperception (and hope) that taxpayers and voters will not understand the connection between decreased state aid for education and increased property taxes - and that voters' retribution will fall on city and town officials.
According to Education Week, the most recent national data indicates that the average state government pays for 49.5 percent of education costs. In 1996, Rhode Island picked up 40.2 percent of education costs. But presently, the state only pays for 36.6 percent of the costs of educating Rhode Island's children - and that ranks us 43rd among the 50 states.
When the state shirks its responsibility to fund education, cities and towns must make up the difference. The only significant tax that we have the power to levy - as dictated by the same state officials who fail to fund our schools - is the property tax. Of the 50 states, Rhode Island is second-highest in its reliance on property taxes to fund education. Rhode Islanders pay more in property taxes than in sales and income taxes combined.
And so we are faced with the decision: Do we decrease the quality of education that our children receive? Do we take the ludicrous steps of reducing or eliminating arts, music, sports, counseling, nursing, transportation and even kindergarten?
Or do we instead hike those despicable and stifling property taxes which make new development less attractive, force the elderly and those on fixed incomes to dip into their savings or sell their homes, raise rents and put a dispoportionate financial burden on the middle class and the poor? Over the last two years, Providence has both made millions of dollars in cuts and raised taxes by more than 11 percent.
But Providence is not, and has not been, aberrant in its rate of school funding -among big New England cities, we're right in the middle of the pack. For instance, our per-pupil spending is thousands of dollars lower than in Hartford - the only city outside of the South that matches our child poverty rate, which is the third-highest in the nation. Cambridge spends nearly $15,000 per year on each of its public school students.
Mayor David Cicilline '83 negotiated and the Providence City Council ratified a new fiscally responsible contract with our teachers that has them contributing to the costs of their health insurance. We're carrying fewer and fewer teachers, nurses, counselors and coaches, and are poised to lay off dozens more.
Providence officials have struggled with this dilemma for years. But the state has let the problem grow so bad that we're not alone anymore. As evidenced by articles and editorials in the Providence Journal, communities across the state have reached the breaking point: Chariho expects to be sued for not meeting state standards; North Kingstown has postponed all maintenance for a year; South Kingstown closed a school; Newport is considering closing one or more elementary schools. Woonsocket, Bristol, Coventry and others have also joined Providence in laying off important personnel.
According to the Rhode Island Policy Reporter, restoring income taxes to their 1996 level would raise $100 million. If coupled with a commensurate decrease in property taxes, something like 90 percent of Rhode Islanders would pay the same taxes they pay today, or less. The 10 percent of taxpayers who would pay more are largely the greatest beneficiaries of President Bush's tax cuts.
Our schools are starving statewide, so a property tax reduction equal to the income tax increase might not be possible this year. But a significant decrease in property taxes certainly is, and our tax code would be fairer for it.
The state should increase income tax revenue, tie municipal aid to lower property taxes and bring our school funding in line with the rest of the country's.
David Segal serves Ward 1 and Miguel Luna serves Ward 9 on the Providence City Council. Bert Crenca serves on the Providence school board and runs AS220.
