McKee Proposes Tax Increases and Larger Budget

McKee Proposes Tax Increases and Larger Budget

Rhode Island Governor Dan McKee has unveiled his Fiscal Year 2026 budget with a spending level of $14.2 billion, and it is layered with tax increases, more spending, and, in some departments, major increases in staffing costs.

The budget appears to ignore or plan for significant federal cuts.

President-elect Donald Trump has promised at least a trillion dollars in cuts to the federal budget.

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One example of a proposed spending increase is for staffing costs in the Office of Housing, where McKee is proposing a 12% increase over the enacted budget for this fiscal year and a 43% increase over what McKee proposed last year.

 

 

In other areas, McKee wants to slash the budget for such things as environmental protection.

McKee is proposing cutting the budget for the Department of Environmental Management by more than $2 million and the Coastal Resources Management Council by more than a million.

McKee’s budgets have been criticized for using one-time federal funds to fund reoccurring program costs.

Now that the federal COVID money has been exhausted, McKee is scrambling to close a significant deficit.

“While the financial outlook for the FY 2026 budget has improved, the projected funding gap of about $300 million is very problematic, representing more than five percent of the current level of state spending,” said Michael DiBiase, President and CEO of RIPEC said earlier this week. “After years of abundant federal funding and large state surpluses, the governor and General Assembly must now closely evaluate spending to bring expenditures in line with available resources.”

The report finds that the primary driver of the projected deficit for FY 2026 is the use of substantial one-time revenues to pay for recurring expenditures in the current FY 2025 budget. In its May 2024 report on the governor’s proposed FY 2025 budget, RIPEC highlighted the use of one-time revenues as contributing to the sizable structural deficit. Despite the availability of substantial additional revenues, the funding gap was not substantially improved in the final enacted budget for FY 2025.

 

Tax Increases

McKee wants to jack up taxes and implement new taxes on a range of industries.

He wants a 10% tax on digital advertising that would be paid by large tech companies like Facebook. His FY2026 budget "imposes a new 10.0 percent tax on business revenues derived in Rhode Island from digital advertising for companies with at least $1 billion in global revenues,” according to the briefing.

 

Truck Tolls

McKee looks to hit the trucking industry hard. His FY2026 budget proposal "recommends revenue assumptions of approximately $10.0 million in FY 2026, increasing to $40.0 million in FY 2027, to account for the anticipated re-implementation of truck tolling."

He also wants to increase cigarette taxes.

“The recommended budget increases the per-pack cigarette tax by 50 cents to $5.00 as part of ongoing efforts to reduce tobacco use. The increased fee is projected to generate an additional $4.4 million in FY 2026,” according to McKee’s office. 

And, he wants tax Airbnb rentals.

McKee wants to tax electric vehicles according to the budget briefing documents, “With gas tax revenues projected to decline, the State must ensure sufficient transportation funding. The budget proposes new registration fees on electric and plug-in hybrid vehicles since all vehicles impact roads and bridges."