Rhode Island Governor Dan McKee approved H. 7127, which, starting in 2027, imposes a personal income tax surtax on annual income exceeding $1 million in the year. The legislation was enacted as part of Rhode Island's fiscal year 2027 budget bill and establishes a phased-in surtax that will increase the effective tax rate on taxable income above $1 million from 5.99% to 8.99% when fully implemented.

The millionaire's tax proposal originated in Governor McKee's FY 2027 budget recommendations. Supporters characterized the measure as a means of generating additional revenue from the state's highest-income taxpayers, while helping fund affordability and other state priorities. Legislative estimates projected that the surtax could generate approximately $142 million annually once fully phased in.

Personal income tax surtax

Under prior law, Rhode Island imposed a single top personal income tax rate of 5.99%. H. 7127 adds a new surtax on taxable income exceeding $1 million. Rather than immediately imposing the full additional tax, lawmakers adopted a phased-in implementation schedule.

The surtax is scheduled as follows:

Ernst & Young LLP insights

Rhode Island joins six other states that have imposed an income tax surcharge on millionaires: California (effective January 1, 2005), Hawaii (effective January 1, 2027), Maine (effective January 1, 2026), Massachusetts (effective January 1, 2023), Rhode Island (effective January 1, 2027) and Washington (effective January 1, 2028).