Millionaire's Tax opponents claim that small businesses will be on the hook - and it's just not true

"Those who claim to represent the interests of small and micro businesses need to stop pretending that the biggest threat is a policy that doesn’t even apply to the majority of them."

“We’re here today because many of those opposed to increasing taxes on the highest-income earners are trying to use numbers to confuse policymakers and the public, and to obscure real differences among business owners,” said Alan Krinsky, the Economic Progress Institute’s director of research and fiscal policy. “They’re trying to persuade you that all business owners are the same and they all have the same priorities, and that the top priority for all of them is lower taxes.

“While they may claim to represent all business owners and try to characterize all business owners as mom-and-pop shop owners, they are mainly representing and promoting the priorities of large multinational corporations and their owners, not the tens of thousands of Rhode Island’s micro and genuinely small business owners.”

Krinsky was speaking outside Still on Main, a vibrant Black-owned business incubator and mini-mall in Pawtucket, focused on revitalizing downtown with diverse entrepreneurship, dining, and community space.

“Policymakers on Smith Hill must understand that they need to be working in the interest of all Rhode Islanders, including the tens of thousands of micro and small business owners, and that they need to enact tax policies that will benefit all Rhode Islanders, both the top 1% and the other 99%,” continued Krinsky. “Rhode Island can raise adequate revenue and invest in the kinds of things that help all of us thrive.”

Here’s the video:

The press conference was held to counter the arguments being made against increased taxes on the wealthiest Rhode Islanders, promulgated by right-wing think tanks and local Chambers of Commerce. The proposed legislation, introduced by Representative Karen Alzare and Senator Melissa Murray, would affect only the wealthiest 1% of households with a modest surtax on income over $640,000.

“For far too long, everyday Rhode Islanders have carried the weight while those at the very top have benefited the most,” said Representative Alzate (Democrat, District 60, Pawtucket, Central Falls). “This bill asks the wealthiest households to contribute a little more so we can invest in our state to help create its success… Let’s be clear, this bill is good for small businesses. Small businesses depend on customers having money to spend.

“Many small business owners are not millionaires living off wealth. They are people who reinvest their earnings back into payroll, rent, inventory, and keeping the lights on. This bill does not target corner store owners, barbers, contractors, or family restaurants trying to survive. It asks more of those who can afford it the most. We also hear the same argument every time.

“If I had a dollar for every time somebody told me that the wealthy were going to leave, we probably wouldn’t need this bill. But evidence from other states shows that modest tax increases on top earners do not cause mass flight. People stay for jobs, family, quality of life, and opportunities.

“Rhode Island cannot cut its way to prosperity. We need revenue to build a stronger economy. Passing this bill means better services, stronger communities, and more customers for small businesses… This is about fairness and reinvesting in Rhode Island. And it’s about choosing an economy where everyone has a chance to succeed, not just the 1%.”

“In Rhode Island, the poorest families pay a much larger share of their income in taxes than the wealthiest Rhode Islanders. This makes it much harder for lower-income earners,” said Senator Murray (Democrat, District 24 (Woonsocket, North Smithfield). “When we rely on things like sales taxes, we are making our low- and middle-income families, including over 90% of our small business owners, pay a much larger share of the overall cost of running the state. Income tax equity is central to balancing out this unfair burden and putting our state back on the right track…

“This proposal addresses economic justice and equity in many ways. It assures that the richest Rhode Islanders pay their fair share,” continued Senator Murray. “It helps close the wealth gap by generating revenue to fund education, childcare, healthcare, and infrastructure. Because if we make those things take a back seat to keeping our taxes low for our wealthiest income earners, everyone suffers. Working families and our small and family-owned businesses, which are the backbone of our community, shouldn’t bear more than their fair share of our state’s tax burdens. It’s time to pass our 1% legislation.”

The main arguments:

• The 1% tax will be beneficial for small businesses, as the revenue generated would fund public services like infrastructure, transit, and childcare, which support business operations and increase customers’ disposable income.

• The claim that wealthy residents would flee the state in response to the tax was a myth unsupported by evidence from other states.

• Data shows that the vast majority of Rhode Island’s small and micro-business owners are not in the top 1% of earners and would not be negatively impacted by the bill.

• The tax would be applied to net profits, not gross revenue, meaning it iss based on an individual’s or business’s ability to pay.

• The successful “Fair Share Amendment” in Massachusetts generated far more revenue than projected and funded essential public services.

• The current tax system is inequitable, placing a disproportionate burden on low and middle-income families.

“I want to start by pointing out that Rhode Island is far from alone in considering higher taxes on the top. In just the last four weeks, we’ve seen lawmakers in Maine and Washington state approve higher taxes on the rich, and that comes on the heels of Maryland, New Mexico, New York, Minnesota, and, of course, Massachusetts all doing the same thing over the last few years,” said Carl Davis, the research director at the Institute on Taxation and Economic Policy (ITEP), a nonprofit, nonpartisan national research and data organization specializing in federal, state, and local tax policy. “This is an undeniable national trend, partly because it’s what the public wants. This tax is a proven tool for chipping away at inequality and generating revenue that can improve people’s lives. We’re talking about a very popular reform here, and because of that, the opponents, to be frank with you, have an uphill battle, at least in the court of public opinion. And one thing I’ve noticed from following this debate in Rhode Island and across the country is that there’s a standard slate of arguments that gets used to muddy the waters around this very popular reform.

“And one of those arguments is that this will somehow harm small business owners. Let’s be clear here. We’re talking about a very modest 3% tax on the portion of income that’s over $640,000 per year. For a business owner, this works as a tax on their net profit, not on their gross revenue. And what do I mean by that? Let’s say you have two people who go into business together and eventually reach $10 million in annual sales. That 10 million, that’s not what’s being taxed here. If they’re turning a 10% profit after writing off all their expenses for rent and wages, and so on, they could have a million dollars in profit. Each owner, that means they’re bringing home half a million dollars of income per year, and they’re not paying a dime in surtax under this proposal.

“This tax is not aimed at them. It is crystal clear that this tax is not going to affect your typical small business owner, and for those business owners and shareholders who are affected, it has affected them. It’s because they have a lot of income and it’s genuinely good for them, but they can afford to pay more. If you’re running a new business that’s not profitable or even an established business that’s just having a bad year and it’s not making a meaningful profit that year, you’re not going to pay this tax. This tax is based on your ability to pay. It’s not an unaffordable burden. It’s certainly not a punishment. It’s a reasonable, fair, and affordable contribution to all the crucial services and institutions that the state of Rhode Island has to offer.

“Rhode Island tax revenues helped small businesses in so many ways. Funding education, infrastructure, public safety, health, parks, the list goes on and on, and if you want to run a successful business, you need these things. You need a reliable workforce. You need reliable infrastructure. This reform is really about having a positive vision for Rhode Island and believing the state can do good things for its people if it just has the resources to make it happen.”

“I want to tell you a little story about Massachusetts because, four years ago, we needed revenue,” said Phineas Baxandall, Director of Research and Policy Analysis at the Massachusetts Budget and Policy Center. “We needed to invest in our public systems. We needed our schools to have more investment. We had the Massachusetts Bay Transportation Authority (MBTA), our main transit system, catching on fire and having all kinds of big problems. We had all kinds of shortfalls that we were looking into in the future. And the money we had been receiving from the state due to COVID was beginning to dry up. We wanted to keep some of the things that were really helpful during COVID, like subsidies for early education, free school meals, and free transit outside the Boston area. These were things that had really made a difference.

“Transit usage outside that area had increased by 40%. All of these incredible successes that we didn’t want to give up just because the federal government was pulling out. And so we passed what was called the Fair Share Amendment, and it was essentially a tax, a similar-sized surtax on the top 1% in Massachusetts. And we heard a lot of the same kind of arguments that you all are hearing in Rhode Island here, scaring folks to say people are going to run away. It’s not going to create the revenue that you want it to. In fact, it has so surpassed people’s wildest dreams. People, we budgeted a billion dollars for it in the first year, and it is now producing $3 billion a year. It is investing it in such a steady way that our legislators are willing to invest it in things you know the public will never want to see taken away.

“Things like those free school meals, like those free transit fares, investing in our school systems to be better. All of those kinds of things, like read on to here about the highway bridge having a problem here after decades of neglect. These are the types of things we’re proactively investing in to ensure they don’t happen. And we really hope that Rhode Island will do the same and follow up, because you really don’t have to listen to all these scare stories. You can look to your north and see what a success it’s been.”

“Welcome to the Black Block Cultural District. We’ve worked really hard over the last few years to create a space where people who don’t always have the opportunity to own a business and be at the center of their community have a chance here,” said Developer Leslie Moore, owner of Still on Main. “What we are finding is that public health and its costs are absolutely impacting the mainstream. Our business owners and building owners are paying for challenges like homelessness in our community. They pay for the water, the soap, the paper towels, the toilet paper, because someone has to make it possible for folks to use the restroom in our community. Our business owners are paying the cost of folks with dependencies in our community. It’s affecting our main streets every day. There needs to be resources to support all the different folks in our community. Our small business owners cannot just shoulder it.

“We have an interesting phenomenon in our community,” continued Moore. “We find that just about every business owner here, every small business owner, has another job of some sort. And it means our businesses open around noon or later. Why do they choose to have another job? Because they need to pay for health insurance and childcare. These are real issues, real needs; no one wishes that they had to have a small business and another job, but that is the reality. We do need more sources of funding to support all the folks in our community who want to make a difference, make an impact, revitalize, and be part of what is happening all around them. And so we support taxing millionaires in our state to bring more dollars into our ecosystem to support the folks with the greatest needs.”

“I was at a luncheon not that long ago, and I heard people who are opposing these bills say we should kill the bills,” said Lisa Ranglin, CEO of the Rhode Island Black Business Association (RIBBA). “At REBA, we support close to 6,000 micro and small businesses. When we’re talking about the 1%, we’re talking about 2,300 Rhode Islanders. They’re not going anywhere because they’re currently benefiting from this rigged tax system that is not designed for small businesses and especially Black businesses. At that luncheon, I looked around. It was packed, maybe over 600 people. I couldn’t find many people in the room that looked like me, never mind micro-small businesses in the room.

“When we are talking about real, bold, intentional investment, the state needs to step up... We can make sure that the 1%, the 1% pay their fair share, and I guarantee it, they’re not going to flee the state, like some of the people are saying.

“It’s about equity. It’s about a real bold investment to move the communities, the people, the families that have been shut out for way too long. Rhode Islanders, we can do this. We don’t have to sit around and try to be followers. I think it’s about time Rhode Island’s elected officials lead. Leadership is important, and that’s why people voted for you. We encourage you to take the right steps; if not, we will mobilize and vote you out of office.”

“Despite all the things that have been thrown at us, we are still here, and we will still be here fighting for what is right and just,” said Weayonnoh Nelson-Davies, Executive Director of the Economic Progress Institute. “93.9% of Rhode Island businesses are microbusinesses. These owners are not in the top 1%, not because they’re incapable of being there, but because of a lack of support and the resources they need to scale up; they have not earned more than the $640,000 in taxable income. They are not the ones who need to pay their fair share under this top 1% proposal, yet people at luncheons and at the State House keep citing these businesses to argue that they should protect their wealth.

“What we have heard today is very different from what has been claimed, and it’s important to center this conversation around the real conditions small and micro businesses in Rhode Island need to survive and grow. They need capital. They need access to credit and support. They need access to affordable childcare for themselves and, if they have them, their employees, so they can show up to work.

They need a state with affordable housing, so homelessness is no longer an issue. They need access to affordable healthcare so they don’t have to take on another job in addition to their business, and they need communities to remain stable. They need reliable public transit: RIPTA (Rhode Island Public Transit Authority) needs to be in the 21st century. They need strong schools and workforce training.

“If we truly care about competitiveness in Rhode Island, these are the things we need to be competitive and business-friendly. Those who claim to represent the interests of small and micro businesses need to stop pretending that the biggest threat is a policy that doesn’t even apply to the majority of them. The majority of small and micro business owners are not receiving the large tax break from the One Big Beautiful Bill, or even the tax breaks we have in Rhode Island. They are not receiving the level of support they need, even as they remain the backbones of our communities and our economy.

“It makes me furious that their stories are being used to protect a narrative and the wealth of a limited few, because I know our stories are always used to make certain people richer. Their stories should shape policies that actually support businesses. If we are serious about supporting businesses, then we have to be serious about investing in the conditions that allow them to succeed, and that requires revenue. There is no way you can invest without revenue in this country.

“This 1% proposal is targeted, not as a punishment, but because we have to be honest about wealth generation in this country and in Rhode Island. And we know that wealth is concentrated in a small group of people. This proposal is modest. It focuses on those with the greatest ability to contribute and helps us see the systems that everyone relies upon.

“The surtax on the top 1% proposal, or even the governor’s proposal for a millionaire’s tax, is critical in this moment because HR1 has shifted severe burdens onto our state. We are calling on our lawmakers to lead and make decisions that benefit the entire state, not a small group of people in power. We want them to make decisions grounded in facts and actual data, not speculative Promises, not historically proven full promises of a trickle-down economy, and not threats by those who are getting large tax breaks that they will leave, even though they can afford to pay a little more. Rhode Island deserves nice things, too, like Massachusetts, and small businesses in our state need real policy to drive a strong economy so they can continue contributing. It is time we stepped up in Rhode Island, did what must be done, and stopped catering to groups that already own the wealth yet refuse to contribute their fair share.”