Tax Reform for Delaware

In 2009, Delaware brought back the Estate tax. It hardly brings in any money (this year’s projection is just over 4 million dollars) and discourages rich people from staying here or moving here. It may cost us as much as it brings in. A commission on revenue recommends eliminating it. I applaud their recommendation. The tax may make sense in theory but it does not work at a state level to bring in revenue. It just encourages people to move to Florida.

Other recommendations seem to lack any real creativity such as cutting the charitable deduction and pension deductions then lowering the top rate. I am sure the progressives in the state love the idea of cutting taxes on the rich instead of adding another bracket so the top tax bracket is not 60k of taxable income. I expect a heated debate within the Democratic Party. At least the commission put aside a statewide property tax for now. Such a scheme would drive retirees away from their families in Delaware. It would hurt working class Delawareans whose rent already exceeds a reasonable portion of their income. It would also make us less competitive in attracting commercial real estate investment. New Hampshire has statewide property tax and Delaware has a moderate income tax. Combining the two makes us Connecticut or New Jersey.

Some of the business side tax reform ideas are interesting. They would cut the corporate income tax rate but raise the gross receipts tax slightly (approximately 11% or half a point). The gross receipts tax is on business activity in Delaware before a profit is turned. Such a move would be welcomed by big businesses here but may get a more mixed reception from small businesses.

Frankly, I am surprised that after months of evaluation, nothing was proposed to significantly rework our tax structure.

8 thoughts on “Tax Reform for Delaware”

  1. If Delaware Democrats were the real deal, they would allow a commission to look at reforming spending as well as revenue. It is likely that they would be as “uncreative” as the revenue committee, but even one or two good ideas would help.

    Instead, the Senate Executive Committee and the House Administrative Committee just keeps spending reform off the floor and keeps their hands in our pockets. The Republican ideas may not be the way to go, but at least they have a direction to start a serious discussion. The Democrats have no ideas and no desire to even discuss coming up with any.

  2. “and discourages rich people from staying here or moving here”

    Among the wealthiest zip codes in the United States are Montchanin, DE and Greenville, DE. I don’t see a mass exodus from there, but perhaps the view is different from the poor people’s houses in Bethany and Rehoboth.

    Delaware has the ninth highest number of millionaires per capita in the US.

    Simply making stuff up is not a substitute for actual facts, David.

  3. It certainly is so a substitute for the facts. This site would evaporate without the creative writing.

  4. I know of several millionaires who have moved to Florida or Texas. It also happened to be a factor sited in the report itself. If you do not believe that is a factor, don’t. It is debatable, but being mockingly dismissive does not invalidate an informed opinion. It is not my contention alone, but that of a very distinguished panel.

  5. We’d probably keep more of them if we passed a law requiring warmer weather.

  6. Nothing concerning Delaware’s taxation policies is likely to change as long as “Pistol Pete Schwartzkopf” is speaker of the house. Gov. Markell and Pete form a wonderful team to promote socialism in Delaware.

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