RI Property Tax Policy Harmful To Low Income Families: Report

RHODE ISLAND — Rhode Island residents pay for public safety, schools, trash collection and other essential community services largely through local property taxes. But some tax experts say overly relying on property taxes places an unfair burden on lower income and middle class families.

In Rhode Island, the average homeowner spends $4,329 annually in real estate property taxes, the eighth most in the United States, according to a WalletHub report published Wednesday.

States like Rhode Island, that rely heavily on property taxes, are using a "regressive tax," real estate attorney Gary Forshner told WalletHub.

"In other words, poor and working-class families typically pay significantly more of their income for housing than those of greater means and therefore property taxes fall more on lower and middle-class households," Forshner said. "Moreover, when local communities rely exclusively or substantially on property taxes, lower-income communities often struggle to provide critical services otherwise available in wealthier communities when in many cases lower-income communities have a greater need for certain services, such as police and social services."

Forshner said a better policy would be to spread taxes for essential community services over a "broader and more equitable base than local property taxes."

Other experts like Lyndsey Rolheiser, an assistant professor at the university of Connecticut, say there may be more value in implementing a land value tax in place of or complimentary to a real estate property tax.

"Redevelopment of a single-family home into multifamily may not take place due to the increased property tax expense," Rolheiser told WalletHub. "Under a land value tax, the owner is not taxed on the structure, so would not face the additional burden if they redeveloped to the highest and best use."

Rolheiser said this form of taxation would encourage the building of more affordable housing.

"Of course, this requires that zoning allows for such redevelopment," Rolheiser said. "But many communities are slowing considering the harms that exclusionary zoning (strict single-family zoning) has on its residents and prospective residents and relaxing some of their strictest zoning regulations."

See the full WalletHub report and methodology here.