In the face of federal cuts and rising prices, Rhode Island Governor Daniel McKee has proposed that all Social Security benefits be exempt from state taxation. While this might seem like a move that can help equalize income, that might not be the case. At face value, exempting Social Security benefits from taxation seems like the best way to aid those who use it as their primary or only source of income.
However, there is data to prove the contrary.
To begin with, Rhode Island already exempts benefits from taxation for those with the lowest incomes. In 2025, the state announced that benefits would not be taxed for those whose taxable income is $107,000 or lower. The number was a little higher for married couples filing jointly. Married couples who were filing their taxes together had a limit of $133,750.
Now, if all Social Security benefits were made non-taxable, the people who would benefit from such systems would be those with the highest income in the state, which includes millionaires.
The Institute of Taxation and Economic Policy has looked into the governor’s proposal, and the results confirm the issues that experts have pointed out. According to the report, 91% of the benefits that would be gained by the exemption would belong to the top 20% income earners. People in this income bracket usually are able to make $151,000 or more.
35% of the benefits that are generated by this are received by the top 5%, and the top 7% of the benefits go to the top 1%. The biggest issue with this proposal is the huge chunk that it will take out of the state budget. In times of uncertainty, when federal funding to states can be cut at a moment’s notice, Rhode Island cannot afford such spending. The proposal might take an axe to the various efforts that the state government has undertaken to raise revenue for government spending. The focus of a lot of these efforts has been to raise money from the top income earners of Rhode Island, with policies like a Millionaire Tax being proposed.
Aaron Guckian is speaking out against the proposed millionaire’s tax, warning that Rhode Island cannot tax its way out of rising costs and economic uncertainty. As families feel squeezed by fees, estate taxes, and a growing state budget, he’s calling for smarter systems — not… pic.twitter.com/Xh9T4haedE
— Aaron Guckian for RI (@GuckianRI) March 2, 2026
It remains to be seen what else the government can do to make ends meet and generate enough revenue to stave off a federal cut if it needs to. However, the proposal to cut taxation on all Social Security benefits would end up costing upwards of $60 million by 2030, which is spending that the government can truly not afford.
