Rhode Island is “particularly tough on retirees” according to a report by business forecast and personal finance publication Kiplinger.
The Ocean State taxes up to 85 percent of Social Security benefits similar to the way the federal government does and it taxes “virtually all other sources of retirement income,” according to Kiplinger.
While railroad retirement benefits are exempt, which is true for every state, out-of-state government pensions are fully taxed.
As of January 2011, Rhode Island revised its income tax withholding rates, brackets and withholding allowances. The revision expanded tax brackets and lowered the top marginal income-tax rate from 9.9 percent to 5.99 percent.