Jonathan Starky (@jwstarkey) has good article in today’s New Journal about what potentially would be a boring article to many except readers of this blog: “Revenues keep dropping in key state income source: Corporation fees falling as businesses decide not to go public”.
Delaware’s franchise tax is the state’s primary source of that corporate taxation, generating more than $600 million annually. Yet adjusted for inflation, franchise tax collections have fallen 20 percent in the decade since the technology bubble sent a tsunami of tax revenues flowing into Delaware. Franchise tax revenues have risen in absolute dollars, but dipped as a percentage of Delaware’s General Fund budget even as tax increases in 2003 and 2009 raised the franchise tax cap from $150,000.
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Now the financial council expects revenues from the tax to fall 1 percent in the fiscal year ending this June, and another 1 percent in fiscal 2013. Big-ticket items are causing pressure on the other side of the budget, with spending on Medicaid increasing 37 percent next year after reductions in federal dollars. Spending on state employee benefits also continues to increase, even after a deal last year to curtail benefits to save money.
Being so dependent on Wall Street for our money, Delaware is looking for ways to help kickstart IPOs. The recently signed JOBS Act, legislation introduced by Rep. John Carney, may be of some help. But in reality, Governor Markell is going to have to look at less spending over the next few years instead of more.