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.