Gov. McKee proposed state budget includes millionaire tax bracket, health insurance subsidies

On Jan. 15, Gov. Dan McKee unveiled his new state budget for fiscal year 2027. The proposed $15 billion budget would change clean power goals, introduce means to cut energy costs, raise taxes for the top bracket and give the governor line-item veto power. 

In a press release announcing the proposed budget, McKee said he is committed to supporting everyday Rhode Islanders amid national economic difficulties.

“I submit my budget proposal for those families, for all families,” he wrote.

McKee’s budget would place a 3% surtax on Rhode Islanders who make over $1 million per year, bringing the income tax for the state’s top tax bracket from 5.99% to 8.99%, just about matching Massachusetts’s rate and surpassing that of Connecticut, Maine and Vermont.

If approved, the millionaire’s tax would raise $67.1 million in fiscal year 2027 and $135.5 million in fiscal year 2028. 

On Jan. 22, members of the Working Families Party of Rhode Island announced a package of four bills that would build on McKee’s proposal by taxing a greater share of the state’s top earners. The bill proposals include a 3% surtax on annual taxable income above about $640,000. 

The Working Families Party of R.I. did not respond to The Herald’s requests for comment.

Laurie White, president of the Greater Providence Chamber of Commerce, and Michael DiBiase, president and CEO of the Rhode Island Public Expenditure Council, voiced opposition to the tax increase. 

“A ‘millionaire’s tax’ is going to hurt the mom-and-pop businesses that make Rhode Islanders proud,” they wrote in a joint statement shared with The Herald.

McKee also called for the implementation of a line-item veto, which would allow the governor to strike items from the budget without vetoing or approving the bill in its entirety. Currently, Rhode Island is one of only six states that does not grant its governor line-item veto authority.

The budget additionally contains $9.5 million in subsidies for a “targeted affordability program” for Rhode Islanders insured through HealthSource of Rhode Island — the state’s health insurance marketplace — amid federal cuts to insurance. These funds keep coverage affordable for around 20,000 individuals, according to the proposal. The budget also allocates $10 million in funding for Rhode Island-based hospitals.

Overall, McKee has dedicated about 45% of the proposed budget to health and human services.

State Sen. Sam Bell (D-Providence) criticized McKee’s healthcare proposals because they give the state health insurance commissioner the ability to limit health insurance companies’ cost growth.

Bell described the proposal to The Herald as “a cap on how much insurance companies pay out to patients and providers.”

“There’s no language requiring that the insurance companies pass the savings on to people,” he added. “This is a truly deranged idea.”

Bell also called McKee’s proposed removal of weight loss drugs GLP-1 from health coverage “cruel.”

“It’s not an effective cost saving thing,” he said. “It's really an idea that lower income people should not be able to access medicine to help them lose weight.”

McKee’s office did not respond to The Herald’s request for comment. 

The Hospital Association of Rhode Island, on the other hand, “commends Gov. McKee’s continued engagement on healthcare and his recognition that our healthcare system is under growing strain,” HARI Senior Vice President Lisa Tomasso wrote in a message to The Herald. 

McKee also plans to amend the state Renewable Energy Act, which created the renewable energy standard in 2004. His plan would delay the timeline for the state to transition all of its electricity sources to renewable energy sources from its original deadline of 2033 to 2050. This postponement would help McKee fulfill his plan to cut energy costs for Rhode Islanders by $1 billion over the next five years.

Rhode Island’s previous deadline for 100% renewable energy use was the most aggressive in the country — all other states with the same goal are aiming for deadlines of 2040, 2045 and 2050. The state’s residential electricity rates are currently the fourth highest in the country. 

The McKee administration estimates that amending the renewable energy standard will save Rhode Islanders a total of around $597 million over five years. Capping funding for energy efficiency programs, discontinuing incentive payments to Rhode Island Energy and other initiatives would make up the rest of the $1 billion in savings. The average ratepayer would see a decrease of about $180 per year.

But clean energy advocates expressed concerns about changing the standard. “To truly manage consumer energy bills, the state needs to remain committed to our Renewable Energy Standard and other clean energy programs,” Tina Munter, R.I. policy advocate for Green Energy Consumers Alliance, wrote to The Herald.

“It’s absolutely absurd that the governor would choose to gut our climate programs,” Bell said. “It’s caving to the Trump administration's agenda against renewable energy. The climate crisis is real.”