R.I. Governor’s Shocking Millionaires Tax Proposal: Will You Be Affected by Trump’s Cuts?

Rhode Island Governor is preparing to address the state's financial landscape in his upcoming 2026 State of the State Address, set for 7 p.m. Tuesday. A key topic is whether to include a proposed millionaires tax in his budget proposal, with McKee hinting, “We’ll have a little more to say about that in the State of the State, but I wouldn’t be surprised.”

While McKee has refrained from specifying the tax rate for the state's highest earners, previous proposals suggested a 3 percent tax on incomes exceeding $625,000. McKee criticized this threshold as being too low, emphasizing that more clarification will come when the budget is unveiled later this week.

“When we put out the budget, then that will clarify what that looks like,” he stated.

The overarching theme of McKee’s address will be “affordability for all.” To bolster this initiative, he plans to propose eliminating state income taxes on Social Security benefits for all Rhode Islanders over a three-year period. Currently, Rhode Island is one of only nine states that tax Social Security benefits, with McKee asserting, “We’re a major outlier,” and that this tax hinders efforts to raise incomes across state households.

The Economic Progress Institute has expressed concerns over this proposal. They pointed out that Rhode Island already exempts Social Security benefits for incomes up to $107,000 for single filers and $133,750 for joint filers. Extending the exemption would disproportionately benefit the top 20 percent of earners, costing the state approximately $50 million at a time when it is grappling with a $101 million budget deficit for fiscal year 2027.

McKee acknowledges that those earning $150,000 in retirement are not living extravagantly, stating, “If you’re making $150,000 in retirement, you certainly can pay your bills, but you’re not on Easy Street.” He also noted that some early retirees do not qualify for the tax exemptions on Social Security benefits, which adds complexity to the issue.

Adding to the budgetary challenges, McKee cited federal cuts and policy changes as factors influencing his review of the millionaires tax. Reports from his administration have indicated that former President Trump’s “One Big Beautiful Bill Act” could jeopardize Medicaid coverage for more than 30,000 Rhode Island residents and reduce food assistance for at least 2,300 households.

Various groups, including labor organizations and Senate leaders, have reiterated their support for taxing the wealthy. However, resistance remains from business entities like the Greater Providence Chamber of Commerce, which have long opposed the millionaires tax.

“I don’t expect everyone to agree with my proposals,” McKee remarked. “This is in the best interest of the state of Rhode Island, just like applying a Social Security reduction on all taxes.” He added that business groups might be more receptive to other proposals aimed at reducing energy costs, signaling plans to provide relief from energy bill fees, though specifics were not disclosed.

McKee's budget plan is also expected to include bond items aimed at economic development, as he stated, “This is all about j-o-b-s.” He anticipates implementing a bond strategy to stimulate job creation and maintain wages throughout the state.

On the transportation front, the budget will allocate funds to address a projected deficit at the Rhode Island Public Transit Authority (RIPTA). In August, RIPTA made service reductions to over 40 of its 67 bus routes due to financial difficulties and still faces a shortfall estimated at $14 million.

Despite low poll numbers, McKee affirmed his commitment to running for re-election, dismissing speculation about a potential exit from the race. House Speaker K. Joseph Shekarchi is contemplating a run against him and could complicate the budget process as he would be involved in vetting McKee’s proposals while campaigning.

“I’ve had conversations with the speaker,” McKee confirmed. “He’s taken a position of, I’m running, he’s not. And I’m running.”

Mckee has refrained from endorsing Lieutenant Governor Sabina Matos in her expected bid for re-election, though he indicated he would not support any other candidates for the position. His campaign has undergone some changes, including the departure of his campaign manager, Rob Silverstein, without yet hiring a replacement. However, McKee expressed confidence in his campaign abilities, saying, “I understand how to run a campaign.”

As the legislative session opens, the potential closure of Our Lady of Fatima Hospital and Roger Williams Medical Center, both facing bankruptcy, looms. McKee noted it is premature to discuss potential state intervention, such as eminent domain, while waiting to see if a prospective buyer, The Centurion Foundation, can secure financing.

“My job is to make sure they don’t close. We’re going to do everything possible to make sure that the services that are provided there continue, and the jobs that are there are secured,” McKee assured.

Finally, McKee was noncommittal regarding a proposal from a commission convened by the Rhode Island Foundation to overhaul the school funding formula, which could shift a greater financial burden to the state and would require an additional $590 million if fully implemented. He expressed interest in understanding the proposed revenue sources to cover these costs.