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Administration proposes phase-out of state tax on Social Security; AARP and seniors endorse the move
Summary
The governor's budget would phase out state taxation of Social Security over three steps, beginning in tax year 2027 and ending in 2029. Senior advocates and AARP said many current taxpayers are low- and moderate-income early retirees who would benefit immediately.
Article 5 of the governor's proposed FY2027 budget would phase out Rhode Island's taxation of Social Security income in three steps: remove the age-based limitation in tax year 2027, raise income thresholds in 2028, and fully exempt Social Security by tax year 2029.
Sharon explained the design and fiscal timing, saying the first phase generates a modest near-term revenue loss (about $3 million in the budget before the committee) and larger out-year effects (estimates ranged into the tens of millions by 2030). Committee staff said the phase-in is intended to limit abrupt fiscal effects while targeting relief for seniors.
Catherine Taylor, Rhode Island State Director for AARP, urged passage on behalf of older residents, noting many early retirees who currently pay tax have modest incomes. "We already exempt most low-income Rhode Islanders from taxation; this proposal would remove a remaining tax on many who rely on Social Security," she said.
AARP witnesses provided member survey data showing strong support for elimination of the tax; several public commenters emphasized that some early retirees rely on Social Security as a majority of their retirement income and would face hardship if the state continues to tax it.
Committee members sought clarifying examples to understand dollar impacts on particular scenarios (for instance, a 62-year-old with $207,000 in income) and asked staff to provide illustrative taxpayer examples for follow-up.
The hearing produced no vote; the committee requested additional profile examples and cost breakdowns before deciding whether to include the full phase-out in the House budget.
