May 18, 2010

Greener Taxation Grass Across the Border

Justin Katz

An interesting conversation took place in the comments section of my "Nothing to See Here" post, and this offering from Patrick is worth highlighting:

Let's look at facts now:

Using the numbers here, on the state's department of revenue web site:
https://dlsgateway.dor.state.ma.us/gateway/Public/WebForms/TaxRate/ReportTRApprovalPublic.aspx

And here at Riliving.com for RI's:
http://www.riliving.com/aboutrhodeisland/taxrates/index.aspx

East Providence: 15.43
Seekonk: 9.64
Rehoboth: 8.90

Woonsocket: 22.36
Wrentham: 12.22
Blackstone: 12.52

Pawtucket: 17.78
Attleboro: 10.09
N. Attleboro: 9.82

Tiverton: 14.35
Fall River: 8.06
Westport: 5.54

Those are all bordering towns. Why the difference? Rather than spewing your normal nonsense, I've provided you with facts and sources. Now explain it?

One commenter objected that Massachusetts has higher income tax, and that the state money is spread to municipalities, lower the need for property taxes. The analysis is complicated by the fact that Massachusetts' income tax rate is 5.3% of adjusted income, while Rhode Island breaks its rates up into progressive tiers: 3.75% to $32,550, 7% to 78,850, 7.75% to $164,550, 9% to $357,700, and 9.9% over that. And of course, there's RI's flat tax option, at 6.5%. In other words, Rhode Island's tax rate is only lower for folks at the bottom of the spectrum.

Another way to look at the comparison is through the prism of tax collections, and this chart (granted, from 2002) does show that Massachusetts collected $31.75 per $1,000 to Rhode Island's $25.83. This moves us away from the topic of comparative property tax rates, but it appears to be the case that Massachusetts collects more in income tax because it takes more from people at lower ends of the income spectrum.

Put differently, if you'd like to own a home and work hard to increase your income, you're better off in Massachusetts. If you're content to rent or to live in subsidized housing and earn a small salary, you're better off in Rhode Island. That may, we can suppose, have something to do with Rhode Island's dire economic condition.

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Add on to that:

RI sales tax rate: 7%, but on fewer items than in MA (for now)
MA sales tax rate: 6.25%

RI gas: 30 cents per gallon
MA gas: 23.5 cents per gallon

Both states have a car tax, but the rates are set by the individual towns.

I ran the numbers for my personal situation, and this is me only, but I calculated about a $3,500 difference to live in one of the MA east bay towns than in an average RI town. So you say "MOVE!" Yup, I'm planning to within the next year. It can't come soon enough.

I've met with local and state politicians and given them the numbers and they all just shake their head and basically say "I don't know why".
Really? That's just awesome. The people who can fix the problem have no idea that there even is a problem. Not even the last census, where RI was one of the two states LOSING population was enough for them to ask "why?". Maybe if the 2010 census shows a similar trend (and I'll be surprised if it doesn't), maybe that will make someone ask "why", though i'm not optimistic.

Posted by: Patrick at May 18, 2010 7:31 AM

Who were the producers? Why were they here? And why were they lifted and taken somewhere?

Posted by: Dan at May 18, 2010 8:14 AM

OK, so Justin was very fond of pointing out the "average" Tiverton resident that made what? 42,000?

This hard working Rhode Islander pays about 4 1/4% in Income Tax.
The same person in Ma. pays 5.3%.

Let's take a more "normal" family, one with $80K in income. That family, firmly in the middle class, pays about 5.4%, almost exactly the same as Ma.

As to that vast gas tax, if I have a car that gets 30MPG (and I do) and drive 9,000 miles a year (RI is small), that is 300 gallons times 6.5 cents, or a total of $20 a year! Even with a worse car and lots of mileage, it is not $50.

And, as stated before, you pay a YEARLY PERSONAL PROPERTY TAX in MA. on your car - often over $1K for a new car, in the hundreds for one a couple years old.

The funny thing about you guys is that this work has already been done for us. If you want to talk about total taxation as either a number of a percentage, the tables are already there for the viewing.

Therefore, it appears to me you are simply grandstanding. It is intellectually dishonest to compare Tiverton (which is where this all started) with Fall River. If you are going to do this exercise, you must do it as total taxation per capital as both a number and a percentage.

That, as I mentioned before, turns out to be LESS than MAINE....a state that people are not leaving in droves. It tends to be about 1% higher than some of our sister states......total taxation in RI is 11.4% while it is closer to 10.5 in Ma. and others....higher in NY though!

As you saw with the TCC and Tiverton stuff, the only people who buy your "double" BS are those who are already convinced the sky is falling. Why not present the facts as they actually are and make the debate about reality?

For instance:

"My name is Justin and I think it is horrible that Rhode Islanders pay a average of 1% more of their income toward taxes. I don't think we get the proper value for that extra 1% (about 400 per worker), and I am going to fight hard to shave that 1% off".

Is the truth not enough? Does one have to run around as the boy who cried wolf to get attention.

I'm ashamed of you, Justin, throwing all those figures around without point to the total state ranking of the exact figures in dollars and percentages and how they compare. You would lose on the debate team.

Posted by: Stuart at May 18, 2010 8:49 AM

As to my "proof" and figures, here they are:
http://www.census.gov/govs/statetax/05staxrank.html
(right chart)
Total state taxes:
Massachusetts….. 2,818.39
Rhode Island….. 2,443.07
(Hmm, Ma. is HIGHER)
As to the percentage:
"Estimated at 10.2% of income, Rhode Island's state/local tax burden percentage ranks 10th highest nationwide, above the national average of 9.7%"

I have seen other numbers for the percentage, but it is generally within 1% of the norm nationwide and/or competitive with most Northeastern states.

So, folks, can you come up with actual overall numbers to prove your point......other than the tax foundation which claims you pay a mere 1/2 of 1% above the national average?

And going further on the same debate, would you move to another state which didn't have the bay, beaches, a close airport, access to other transportation and a relatively mild (for new england) climate for......$500 a year? For $1,000 a year? I would not.

So. why not admit it? You just don't like your life or Rhode Island or something else.....but you surely cannot be spending your entire life pushing against that vast 1/2 of 1% or 1% more that we pay for the privilege of living near the water.

Posted by: Stuart at May 18, 2010 8:59 AM

Ya know it's a pathetic place when Massachusetts is your tax haven.
THANKS PROGRESSIVES.

Posted by: Tommy Cranston at May 18, 2010 10:01 AM

Even (and only for the sake of argument) we stipulate that RI's overall tax burden is not out of line (at least for high-cost New England). And leaving aside the uniformly poor quality schools, roads etc. that RI government offers in return for those taxes, look down the road.

The Democrat General Assembly has cobbled together fiscal time bombs: RI's welfare magnet status producing an ever-growing number of tax consumers who contribute far less to the economy than they consume (i.e., parasites), and the unfunded pension and retiree health benefit obligations -- amounting to several billion dollars of additional taxes coming down the pike.

From a fiscal standpoint, and job opportunity standpoint, the future is far brighter elsewhere (as just about every recent RI college graduate will tell you).

Posted by: Ragin' Rhode Islander at May 18, 2010 10:04 AM

"And, as stated before, you pay a YEARLY PERSONAL PROPERTY TAX in MA. on your car - often over $1K for a new car, in the hundreds for one a couple years old."

Gee Stuart, is there someplace in RI that doesn't tax cars?
I must have missed that announcement.
You and your ilk completely ignore the worst and most regressive of the ruling party's taxes-the property tax-which is damn near double Massachusetts and at least triple Florida's. Both of those states have beaches and airports-last time I checked. Plus RI's property taxes are growing faster than Obama's trillion dollar deficits. In a decade a basic no frills 3 bed/2 bath house will be 10 grand a year.
Ain't that progressive?


Progressives-The Dumbest Show On earth.

Posted by: Tommy Cranston at May 18, 2010 10:10 AM

Ragin, let me thank you for at least presenting a realistic argument! You are claiming that RI residents don't get the proper return for their taxes...that is a whole different case than what is and was being made by Patrick and Justin.

Honestly, I am not qualified or studied enough on that to make the judgment. We all want more for our money, of course, but the only apt comparison is to other neighboring states.

You can 100% make the case that a tiny city-state like RI is unable to provide a complete "eco-system" economically and that therefore greater opportunity for many things might be elsewhere. This has always been true, though, and is not a function of just taxation.

Words ARE important, and this is the big beef I have with folks like the tea partiers and many here. It's completely unfair to throw around all these vast exaggerations, when the reality is much closer to "we are in the normal range".

As to what you get for your money, Ma. had universal health care, which is of value to many. RI has no tax on boats, which benefits the very wealthy greatly.

Does RI State government need change and reform? Of course! So do many other states. We'll have to wait 5-10 years and look back and see if which direction things are headed in. Meantime, I'm going sailing.

Posted by: Stuart at May 18, 2010 10:26 AM

Ragin is totally on target. What counts is what you get in exchange for your taxes. Higher taxes that most states can still be very attractive if you get benefits that, relative to other states, are even higher. And the opposite holds true as well -- low taxes can still deliver crummy value.

But I defy anyone to make the argument, using data, that RI offers superior value. Virtually all the data I've seen shows just the opposite, unless you are a public sector union member or a beneficiary of one of RI's many and very generous social welfare programs (what is it, like 20% of the state is on RIte Care?)

Posted by: John at May 18, 2010 5:49 PM

Stuart,

Just to be clear, I was stipulating for the sake of discussion that RI's taxes were (relatively) in line. However, my opinion is that in fact they are grossly excessive.

That said, as to the value proposition, multiple times a year various think tanks and similar organizations come out with rankings of the states regarding various criteria: educational results; condition of roads; tax burden; business climate.

Invariably Rhode Island is ranked in the bottom ten, and typically in the bottom five. So unless RI was an extremely low tax state, which of course it is not, there is no value here.

As for tax free boats, recall that in the 1990's this was done to help stimulate RI's boating industry (manufacturing and marinas / maintenance), and help them recover from the devastation wrought by the "luxury tax." It worked, and I suspect that those employed in those callings do not begrudge that particular "tax break for the rich."

As for MA's universal health care, it ain't workin' out too well.

Posted by: Ragin' Rhode Islander at May 18, 2010 6:59 PM

'unless you are a public sector union member or a beneficiary of one of RI's many and very generous social welfare programs (what is it, like 20% of the state is on RIte Care?)"

The coalition of the scummy:

25% on Food stamps, Rite Care, etc.
20% Present or retired (some before age 40) government "workers".
10 % Rich communists (progressives)

and we wonder why reptiles like Segal, Ajiello, Levesque, Rice, Handy and other not so closeted communists get elected?

Posted by: Tommy Cranston at May 18, 2010 7:03 PM

I notice Stuart is mixing things up so I figure the following information is helpful to those trying to keep up with this ongoing debate on taxes between MA and RI and Patrick asking why is property taxes cheaper in MA than in RI?.

As I mentioned to Patrick earlier, MA is streamlining both state, local government and regionalizing purchasing contracts plus Proposition 2 ½ capping local taxes and also agricultural lands that are on the RI/MA boarder.

RI taxes are out of control where MA has reigned them in. RI taxes show disrespect to anyone who is retired on fixed income or age 65 or has died in the state.

According to Retirement living Information Center latest update:

Massachusetts State Sales Tax: 6.25% (food; prescription drugs; fuel costs; gas, oil, electricity; clothing costing up to $175, are exempt); Gasoline Tax: 23.5 cents/gallon; Diesel Fuel Tax: 23.5 cents/gallon
Cigarette Tax: $2.51/pack of 20.

Rhode Island State Sales Tax: 7% (food, some clothing, precious metal bullion, some burial-related items, prescription and non-prescription drugs are exempt); Gasoline Tax: 33 cents/gallon; Diesel Fuel Tax: 33 cents/gallon; Cigarette Tax: $3.46/pack of 20

Massachusetts Retirement Income Taxes: Social Security, civil service, state/local government pensions are exempt. Pension income from other state or local governments that do not tax pension income from Massachusetts public employees is exempt from Massachusetts taxable income. Retired Military Pay: Not taxed.

Rhode Island Retirement Income Taxes: Railroad Retirement benefits are exempt. Out-of-state government pensions are fully taxed. Social Security is taxed to the extent it is federally taxed.
Retired Military Pay: Follows federal tax rules.

Massachusetts state income tax is Flat rate of 5.3% of federal adjusted gross income with Personal Exemptions: Single - $4,400; Married - $8,800; Dependents - $1,000.

Rhode Island state income tax Rate Range: Low - 3.75%, High - 9.9%. The 2010 budget includes a provision that will treat capital gains income as ordinary income for tax purposes. Previously, capital gains were given preferential treatment and taxed at rates as low as 0.83 percent. Income Brackets: (Single) Lowest - $33,950, Highest - $372,950 (2009 rates); Number of Brackets: 5; Personal Exemptions: Federal exemptions multiplied by $3,500; Standard Deduction: Federal amount or if age 65 or older, $6,850 (single), $13,200 (married filing jointly).

Property Tax on Owner-Occupied Housing, by County, Ranked by Property Taxes Paid, 2006-2008 (3-Year Average) Source: The Tax Foundation and US Census Bureau

MA and RI Counties by ranking: (Only 1 MA County is ranked higher in property tax than RI)

Middlesex County, Massachusetts: Avg. tax: $4,271; Rank: 41
Bristol County, Rhode Island: Avg. Tax: $4,255; Rank: 44
Norfolk County, Massachusetts : Avg. Tax: $4,002: Rank: 58
Washington County, Rhode Island: Avg. Tax: $3,668: Rank: 79
Newport County, Rhode Island: Avg. Tax: $3,667: Rank: 80
Essex County, Massachusetts: Avg. Tax: $3,624: Rank: 82
Plymouth County, Massachusetts: Avg. Tax: $3,550: Rank: 86
Kent County, Rhode Island: Avg. Tax: $3,412: Rank: 104
Providence County, Rhode Island: Avg. Tax: $3,251: Rank: 116
Suffolk County, Massachusetts: Avg. Tax: $3,053 Rank: 133
Hampshire County, Massachusetts: Avg. Tax: $2,971 Rank: Rank: 138
Worcester County, Massachusetts: Avg. Tax: $2,964 Rank:140
Franklin County, Massachusetts: Avg. Tax: $2,785: Rank: 169
Bristol County, Massachusetts $2,671: Rank: 196
Hampden County, Massachusetts: Avg. Tax: $2,633: Rank: 210
Barnstable County, Massachusetts: Avg. Tax: $2,497: Rank: 245
Berkshire County, Massachusetts: Avg. Tax: $2,233: Rank: 306

US Census Bureau ranking of 1,822 Counties with population of 20,000 or more out of 3,077 counties in USA excluding Puerto Rico.

Property Taxes:
Massachusetts does have a Homestead Act. The Homestead Act permits a homeowner who occupies a house as his/her principal residence to shield up to $500,000 in equity in that house from creditors Massachusetts also has a circuit breaker program that offers a real estate tax credit for persons age 65 and older. The excess amount of the credit will be refunded to the taxpayer without interest. For tax year 2009, the maximum credit allowed for both renters and homeowners is $960. To be eligible for the credit for the 2009 tax year; the taxpayer or spouse, if married filing jointly, must be 65 years of age or older at the close of the 2009 tax year; the taxpayer must own or rent residential property in Massachusetts and occupy the property as his or her principal residence; the taxpayer's "total income" cannot exceed $51,000 for a single filer who is not the head of a household, $64,000 for a head of house hold, or $77,000 for taxpayers filing jointly; and for homeowners, the assessed valuation as of January 1, 2009, before residential exemptions but after abatements, of the homeowner's personal residence cannot exceed $788,000.

Property Taxes:
Rhode Island state property taxes are not imposed directly by the state, but a portion of the city and town taxes is set aside for state purpose. Taxes are assessed and collected by the local jurisdiction. Fire district taxes are collected in some rural communities. Homeowners 65 and older who earn $30,000 or less can get a property tax relief credit of up to $250.

Massachusetts Inheritance and Estate Taxes:
There is no inheritance tax and a limited estate tax on estates valued at $1,000,000 or more.

Rhode Island Inheritance and Estate Taxes
There is no inheritance tax. Rhode Island imposes a tax on the transfer of the net value of the assets of every resident decedent and the value of real and personal property of nonresident decedents located within this state. The tax is apportioned in accordance with the location of the assets with actual situs (both real and personal property) in another state. The fraction is Rhode Island assets over total estate assets.

The Rhode Island estate tax is designed to absorb the federal estate tax credit for state death taxes. However, the state has decoupled from current federal estate tax laws and adopts the version of the Internal Revenue Code in effect on January 1, 2001. The estate tax exemption is $850,000. Estates of decedents who are declared missing in action by the armed forces of the United States are not subject to the state's estate tax.

Posted by: Ken at May 18, 2010 9:00 PM

The grass is greener over the state line!

As Justin is pointing out; “(granted, from 2002) does show that Massachusetts collected $31.75 per $1,000 to Rhode Island's $25.83. This moves us away from the topic of comparative property tax rates, but it appears to be the case that Massachusetts collects more in income tax because it takes more from people at lower ends of the income spectrum.”

Please note: I feel the tax rating is skewed by the Tax Foundation for Hawaii because they write; “Hawaii levies a 4% general sales or use tax on consumers, which is below the national median of 5.85%. In 2007 combined state and local general and selective sales tax collections were $2,664 per person, which is the highest in the nation.”

Hello Tax Foundation; Hawaii averages 70,000 tourist a day arriving in Honolulu, HI alone spending at least $100 a day during their vacations no wonder the sales tax collections are highest in nation!

From Retirement Living Information Center:

Tax Burden By State (which you will notice RI is listed in the top 10 taxing states but will not see MA listed):

“If all other things are equal, a state with a lower burden is a more attractive place to retire than a state with a higher one. To get a true sense of which state is less expensive, you need to look at state and local tax burdens. Only then do the low tax states stand out.

It is estimated by the Tax Foundation that the nation as a whole will pay on average 9.7% of its income in state and local taxes in 2008, down from 9.9% in 2007 primarily because income grew faster than tax collections between 2007 and 2008. This is the latest report the Tax Foundation has issued.

New Jersey residents paid 11.8%, topping the charts. New Yorkers were close behind, paying 11.7%, and Connecticut was third at 11.1%. The top 10 were rounded out by Maryland (10.8%), Hawaii (10.6%), California (10.5%), Ohio (10.4%). Vermont (10.3%), Wisconsin (10.2%) and Rhode Island (10.2%).

Alaskans pay the least, 6.4 percent in 2008, but Nevada is close at 6.6 percent. In four states the residents pay between 7 and 8 percent of their income in state and local taxes: Wyoming (7.0%), Florida (7.4%), New Hampshire (7.6%) and South Dakota (7.9%). Four other states round out the bottom 10: Tennessee (8.3%), Texas (8.4%), Louisiana (8.4%) and Arizona (8.5%).

For more information about the tax burden in each state see the following link: http://www.retirementliving.com/RLtaxburdens.html

Sources:
* Individual state tax and revenue departments
* State Tax Handbook (2010); published by CCH Inc.
* Federation of Tax Administrators
* The Tax Foundation
* National Conference of State Legislatures

Updated January 2010; based on available data.“

Posted by: Ken at May 18, 2010 10:33 PM

I don't know who can honestly say Tiverton is in anyway as affordable to live in as other towns in near by Mass you have to be an idiot because everyone I talk to on my street is paying twice what they would pay in property tax in near by Mass, and if most of us could sell our homes tomorrow we would be gone in a second.

Posted by: James at May 18, 2010 11:40 PM

"I don't know who can honestly say Tiverton is in anyway as affordable to live in as other towns in near by Mass you have to be an idiot"

IDIOT. What a clear and succinct definition of "progressive".

Posted by: Tommy Cranston at May 19, 2010 8:12 AM

Ken is throwing lots of numbers around, Tommy is jumping up and down, but the facts remain...that RI has the same or lower taxes than MA and is also somewhat competitive with other NE states.

It is a totally different subject, and one which I will agree on, as to what one gets for their tax money. But that often depends on where you sit. If you just bought a $200,000 yacht, you'll love the savings as compared to Ma. But if you are working poor and can't afford your Health Insurance payments, you might like MA.

But, all in all, there are no miracles here or in neighboring states.

Posted by: Stuart at May 19, 2010 9:21 AM

>>But, all in all, there are no miracles here or in neighboring states.

But there are miracles to be had in the Southeast / Sunbelt, particularly the no income tax states of Texas, Tennessee and Florida.

No snow and no union-puppet Democrat politicians socking you in with a blizzard of taxes and fees.

Little wonder that companies have been flocking to these areas, and their employees following them.

Hmmm, sounds a bit reminiscent of Atlas Shrugged, does it not?

With each passing year more people reach that "tipping point" and decide that the expense and hassle of relocating is better than continuing to endure living in RI, despite those positives that it offers -- particularly since the General Assembly is bound and determined to continue making things worse.

Little wonder that RI and Michigan are the only two states actually losing population.

Posted by: Ragin' Rhode Islander at May 19, 2010 11:50 AM

Ragin...you have funny heros! Texas has 25% of their citizens without health insurance, a culture of complete corruption by the oil interests and some of the dirtiest air in the USA.
Florida is a complete wreck, with kids going to school in tiny trailers. Tennessee, where I once lived, has an unemployment rate of 10.6%, even with their low, low, low wages.

I would suggest moving if you think the grass is greener.

Texas:
"With an $11 billion budget shortfall looming, should taxpayers be concerned that Gov. Rick Perry has spent almost $600,000 on his 6,386-square-foot rental home while the governor's mansion is being rebuilt?"

Tennessee:
"The state, according to January 2010 reports, is facing an estimated $1 billion shortfall. Gov. Phil Bredesen warned in November 2009 the extent of the state's budget problems have been concealed by the federal stimulus funds and that more severe cuts would be coming."

Florida:
"The FY2011 budget is $4 billion larger (6% increase) than the prior year's state budget. The Florida State Legislature struggled to plug a revenue shortfall of $3.2 billion."

Posted by: Stuart at May 19, 2010 4:01 PM
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