Proposal 2:
Rep. John Kowalko developed a revenue proposal that concerns itself with ways to mitigate the 8% pay cut for State workers. Scroll down to the bottom of the page to get the full presentation (pdf). Rep. Kowalko wants to reject the “spread the pain” approach and make the generation of revenue to preserve state salaries more progressive. Tuesday, Rep, Kowalko will formally present this proposal at a meeting of the State Workers United for a Better Delaware group in Dover (10:00 am, Tuesday, May 5 at the Delaware State Troopers Association, 6349 N Dupont Hwy, Cheswold, DE). From Rep. Kowalko’s press release, this is a summary of the proposals he is making:
- raises the Franchise Tax Cap for Corporations — $107.5 million
- increases the minimum fees on corporations from $75 to $100. — $5.94 million
- increase annual corporate filing fee from $25. to $40 –$3.96 million
- increase annual fee on LLC and LC from $250. to $300 — $28.95 million
- increase filing fees on foreign corporations from $100 to $250 –$1.575 million
- establishes fees for statutory trusts from $0 to $200 –$2.1 million
- utilizes 25% of Rainy Day Fund — $46.5 million
- establishes fees on inherited wealth over $4,000,000 — $40 million
- increases gasoline tax by .05¢ — $25.7 million
- 3 furlough days for non-public school employees –$3 million
- looks at the personal income tax codes to make them more progressive — $82.75 million
Rep. Kowalko has clearly done his homework here and the proposals he makes would generate revenues for multiple years, meaning that his proposal looks to create some long term stabilization of revenues to try to alleviate some of the structural deficiencies of relying on revenue sources that can be hugely variable (income taxes, real estate) depending upon economic health. If you take a good look at his proposal, you can see that it is certainly possible to pass just a few of these options in order to avoid or reduce the 8% cuts. I’m still thinking about the long-term impacts of these proposals, so speaking for myself only, I am currently neutral on the entire package. What would be really useful is a competitive analysis of some of the business-focused taxes — comparing the proposed rates and increases to those of nearby states. But there is no doubt that there is progressiveness in these tax proposals and would relieve the pressures on the salary cuts. No Tax absolutists will need to explain how it is that salary cuts are preferable to raising revenues on wealthier Delawareans and businesses.
One thing that I would take issue with Rep. Kowalko on is the characterization of the 8% cut as a tax increase for state workers. It is not — taxes generate revenue and the proposed cut is a reduction in operating expenses. And you can tell it is not a tax increase by thinking of this in terms of the many Delaware citizens who are taking furloughs, pay cuts and layoffs at private businesses. Those businesses aren’t raising taxes by any stretch — they are reducing their expenses commensurate with current business conditions. And I think that non-state workers facing their own cutbacks won’t find anything sympathetic in trying to rebrand the 8% cuts as taxes.
Last comment for all legislators working with numbers for public presentation. In these days where everyone is concerned with transparency and accountability, this has to apply to how we source data too. Citations of where you’ve gotten your data and even some mention of what analysis you subjected it to (if any) really needs to be mandatory. Specify links to data where possible or provide specific footnotes to where you found the data. It is a good test of transparency for the presenter to see what is available online for the State, plus it really is a Best Practice for both accountability and transparency. John Kowalko gets good marks on this (although could be more rigorous) and the Bonini presentation would be at the Sourcing Fail end of the spectrum.