On February 18, 2026, Rhode Island Governor Rebecca Martinez unveiled a comprehensive tax reform plan aimed at addressing the state's looming budget deficit. The proposal, which includes both increases and cuts to various taxes, is a response to the state's growing financial challenges caused by increasing healthcare costs and a decline in revenue from traditional sources.One of the key components of the plan is a proposal to increase the state's sales tax rate from 7% to 8%. Governor Martinez argued that the revenue generated from this increase would help offset the budget shortfall and fund essential services such as education and healthcare. Additionally, the plan includes a proposal to raise the top income tax rate from 5.99% to 6.5% for individuals making over $250,000 annually.However, the Governor's plan also includes tax cuts aimed at benefiting lower and middle-income families. The proposal includes a decrease in the income tax rate for individuals making less than $50,000 annually, as well as an expansion of the earned income tax credit to provide additional support to working families.In addition to changes to the sales and income tax rates, the Governor's plan also includes measures to increase tax compliance and crack down on tax evasion. This includes investing in technology to improve tax collection processes and increase transparency in reporting.Governor Martinez emphasized that the tax reform plan is necessary to ensure the long-term financial stability of the state and provide essential services to Rhode Islanders. The proposal will now go to the state legislature for approval, where it is expected to face significant debate and discussion.Overall, the Governor's tax reform plan represents a significant step towards addressing Rhode Island's budget challenges and ensuring a more equitable tax system for all residents. Critics, however, argue that the proposed tax increases may place an unfair burden on high-income earners and could have a negative impact on the state's economy. The debate over the plan is likely to continue in the coming months as lawmakers work to find a solution to the state's budget deficit.