Our Choices for Raising New Revenue
Last week, the Delaware Economic and Financial Advisory Council or DEFAC released its latest revenue projections, reporting a $45 million dollar loss in revenue. Last Friday, the News Journal had a story on the Structural Revenue Review Committee and what they see as the reason for the revenue drop:
As the legal or corporate home for hundreds of thousands of businesses, Delaware is allowed to take intangible assets such as dormant checking and savings accounts, uncashed checks and unclaimed dividends and stocks after a certain number of years if the owners can’t be found. […] But corporations that are required to turn over their unclaimed property have challenged Delaware’s enforcement methods, including estimating the amounts due when no actual records can be found. Meanwhile, only a fraction of companies subject to the escheat laws are complying with the reporting requirements. [Secretary of State] Bullock noted that while increased compliance might bring in more abandoned property revenue, technology has made it easier for companies to track ownership of the assets, meaning there likely will be less for the state to claim in the future.
Meanwhile, the state also faces challenges when it comes to gambling revenue, as newer and bigger casinos in neighboring states continue to draw gamblers who used to come to Delaware’s three casinos, panel members were told. Lottery and gambling revenues contributed about $215 million to the general fund in fiscal 2014 but have declined steadily in recent years, with even more competition from other states on the horizon.
So the budget gimmickry that has allowed Delaware to operate on a half-flat income tax structure for decades is coming to an end. So what are our options?
Governor Jack Markell wanted to cut a senior citizen property tax subsidy. No. Not that it would have done much to close the gap anyway. But since he has already submitted his proposed budget, and the specific cut above has been declared dead on arrival in the General Assembly, Markell will likely leave it to the General Assembly to find the details. The two competing plans so far….
The Republican Plan to Protect the Wealthy
Republicans oppose any increases to the personal income tax. Rather, they have advocated for repealing Delaware’s estate tax as a way to lure more people to the state. House Minority Leader Danny Short (R-Seaford) says the state shouldn’t balance the budget on the backs of higher income residents. Better that the state should balance it on the backs of the middle class, union workers and the poor while giving the wealthy more of a tax cut.
Instead, Short is continuing to call for reforming the prevailing wage set for manual laborers working on state construction projects and installing right-to-work zones. Neither of those have any support among Democrats who have called them nonstarters.
So, we should reduce the wages of our workers and cut the estate tax to benefit the wealthy, and somehow, that will raise enough revenue this year to balance the budget. Republicans really are shameless.
A Real Progressive Tax Rate
Rep. John Kowalko (D-Newark South) has been crunching numbers on adding new brackets to Delaware’s personal income tax, which currently tops out at 6.6 percent for those making over $60,000. His proposal could add up to two new brackets around $125,000 and $250,000 and establish tax rates for them between 7.1 and 7.6 percent. That would generate between $13 and $26 million in the first year, with up to $72 million in fiscal year 2017.
Indeed. The answer is just so clear. And yet I guarantee our supposed Democrats in the General Assembly will seek to cut vital services or raise fees.
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time for another Casino!!!! More jobs and everyone wins!
It’s not just an R plan to protect the wealthy. From Day One, Markell has done the same.
I’d add two more elements to a progressive plan to balance the budget. 1. Place a moratorium on state handouts to corporations until/unless the State provides sufficiently compelling evidence that we’re not just throwing money away.
2. Cut Markell’s bloated state Department of Education budget, and require him to live within his means, much like he’s doing to state employees who have little means within which to live.
I wonder if anyone has looked into the cost of state contracts and who is getting the contracts and who they are connected to
The existing two-bracket structure has only existed since the Carper administration — decades, yes, but only two of them.
The Shortfall in the Transportation Trust Fund still needs to be addressed.
Some sort of sliding scale tax on all people and corporations of about 100.00 a year would bring 100 million. More than to deal witn Deldots financial issues both on the highway side and Transit side. The thing to work out would be a collection mechanism. This much more fair than raising the gas tax and bus fares.
“time for another Casino!!!! More jobs and everyone wins!”
No more half measure. Legalized prostitution and for profit euthanasia parlors.
@ El Somnambulo: Totally agree.
Why are we funding a company that does not meet their benchmarks!!
St. Francis Hospital recv’d a $4 million NO INTEREST loan from the State, failed to make a 2013 repayment, now referred to 2015.
In September 2012, Delaware offered specialty chemical maker Ashland Inc. up to $10 million in subsidies in return for the company’s pledge to maintain at least 501 workers in Delaware through June 2017. But in August (2014), Ashland sold its Delaware-based water technologies unit and restructured its remaining businesses. The Kentucky-based company said it would cut up to 1,000 jobs worldwide in 2014 as part of the restructuring and has been slow to his its job-creation mark.
Let’s not mention Fisker.
What this administration has done is crazy!! They need to hold Companies accountable. They need to put clauses in their “Incentives” to these companies and stay firm on their standards.
$72 million dollars by 2017 doesn’t even come close to replacing Casino revenue and Escheat if the state loses them. Escheat was $500 million in revenue by itself according to the News Journal. And based on the case below… courts may rule that DE can no longer collect that revenue anymore.
http://www.delawareonline.com/story/news/local/2015/03/14/ruling-threatens-delaware-unclaimed-property-revenue/70298680/
It’s time for people to stop being idiots and thinking that we can simply nibble around the edges with these idealist arguments. It’s math. Even if I trusted John Kowalko’s math, $72 million < $500 million. Sure, taxing the rich should be part of the conversation, but it's not even half of the solution. According to the NJ, the estate tax brought in $1 million last year. Pennies…. But leave it to liberals to act as though that the estate tax is difference between a cuts a surpluses.
Furthermore, and I say this with all love and compassion….. Fuck State Employees. They make about the same as your average Delawarean, but I have to pay more taxes to keep their 90/10 healthcare split in tact? Do they know what's going on out here? My family deductible is 4 thousand dollars. I have a family of 4 and my healthcare costs are $1500 per month.
Thank God my employer gives me a 50/50 split, but we still have to come up with $750 per month for our premium. My wife and I bring home about 70k a year as a household, which is no different than 2 teachers would make. Nobody makes an argument for us based on the fact that we aren't rich, like everyone does for state employees. I wish I had a $500 deductible and paid less than $100 a month for a premium. My wife and I both went to college, however, the only people who seem to get the good state jobs are family members of legislators and people in the good ole boy's system. I have never seen healthcare plans like state employees in Delaware have. I'm surprised the state isn't bankrupt given that health care cost have been rising for decades yet employees have not had to deal with a lot of rate changes like the other 900,000 residents in the state.
You can't claim to support unions and not support a gas tax. You can't claim to have a populous message, if you are willing to tax everyone else to ensure that UD professors and state employees, many of whom are making $100k per year and are connected, continue to get these sweet health plans.
The legislature shouldn't get to vote on their own healthcare coverage. I almost threw up in my mouth when the Speaker was complaining about having to change his health coverage if the Governor's bill was passed… That's some of the shadiest stuff I've ever heard. He's not going to vote on a rate increase because he doesn't want to mess up his healthcare?
If my choice is between Republicans who don't have a heart, or Democrats who don't have a brain…. call me heartless.
Given the states heroin problem an Opium Den isn’t a bad idea either. We could find a sister city in Afghanistan to directly send us the yam-yam instead of the circuitous route they now take.
Or legalizing marijuana and regulating it. Instead of this bs decriminalization bill. Cowards
Joe Six Pack – Yes and no.
“Sure, taxing the rich should be part of the conversation, but it’s not even half of the solution. According to the NJ, the estate tax brought in $1 million last year. Pennies…. But leave it to liberals to act as though that the estate tax is difference between a cuts a surpluses.”
You moved the target half way through your comment. It isn’t all about estate tax to make the government whole. It is about a progressive income tax that doesn’t just view wages as income.
Did you not read what I wrote before that Jason… I haven’t moved the target. I factored in the $72 million projected by Kowalko from raising rates?… That and the estate tax would be $73 million… which isn’t even 20% of escheat revenue. Not even calculating what we will continue to lose in casino revenue. I fail to see how that is a solution for anyone who can do basic math sir. Unless you want more than a 6-7% rate increase from the rich, which Kowalko isn’t even liberal enough to support.
I didn’t, so my apologies. But would you need to raise rates 6-7% if all income is taxed, trust fund dividends and an honest day’s wages alike?
I mean, we can try to concoct as many “fuck the rich” policies as we want. But unless we take rates up to like 60%, it doesn’t solve our problem by itself.
I wouldn’t characterize allowing the wealthy to provide for the common defense and promote the blessing of liberty as “fucking the rich.”
Also, once they get off the cash hoard, a virtuous circle of investments, employment, and economic expansion will ensue.
fuck the rich? It’s an amazing thing when people are able to twist being taxed more because you are rich into something like victimhood.
It’s like the nonsense with white people and crying reverse racism.
it’s such utter fucking nonsense that when you go crying rich people are unfairly treated you sound like a fucking sod.
If Rich people are too god damned angry and an unhappy with being rich and the taxes that come with it, trade fucking places with the people they think aren’t persecuted enough for living off their perceived entitled, cell phone and big screen tv, lavish lifestyle.
You’re rich, wealthy, and better off than 328,564, 323 people in this country alone. Cry me a fucking river that the money your dad gave you when he died is going to get taxed 50% and you won’t be able to make 5% dividends on the $10,000,000 you planned on reinvesting year over year on that fucking no load mutual fund
I’m just trying to understand why a person who makes 70,000.00 a year is fighting for wealthy people. How do Republicans pull that crap off? How do they get the 70,000.00 a year people to relate to the wealthy and not to people just like them?
Why all the anger toward state employees and not the wealthy? If Joe was angry at both I would still disagree, but at least that would be some form of consistency – in a “everyone should take a hit” sort of way. And if you read Joe’s comments it comes across as taxing the rich isn’t a viable option worthy of discussion (Can’t be done/won’t be enough/Moving on). Toss in his revealing “eff the rich” comment and we see the GOP ideology on full display. The only reason I can come up with is that Joe doesn’t understand how taxes work when you’re wealthy. Could that be it?
Because the person making that 70,000.00 is made to believe they are closer to those that are being persecuted. As if what happens to the wealthy can and will happen to them. The leap from 70,000.00 to 10,000,000 or even 300,000 seems within reach. It seems tenable. Possible.
And in the end, they are too god damn ignorant to know that their lot in life will never come close to warranting those tax breaks they swear the rich deserve and worked their entire lives for.
They are clueless sherpas for the rich, but don’t know they are sherpa’ing
Joe may be living in that alternate universe where people believe that if they think like Republicans and support all their policies that someday they will magically be rewarded with an investment portfolio that any du Pont would envy. It boils down to: we can’t let ’em eff the rich because then I’ll be effed before I ever get mine. The fact that he’s never going to get his has never entered his mind.
Tax, tax, tax. Why not look at cutting some of the fat & waste in govt? Let’s start there.
You want to start there? Fine. List, in detail, the things you want to cut. Be sure to include their costs.
Pandora,
I’m going to be nice to Anonymous and give him a first cut.
Let’s take state Department of Education personnel financed from the General Fund back to FY 2014 levels. Eliminate 14.5 positions, estimated total savings (subtracting FY 2014 total from FY 2015 total) $1,460,500.
Not much, but it’s a start, and I’m willing to let Team Markell/Murphy identify the most expendable positions.
Eliminate 14.5 positions, estimated total savings (subtracting FY 2014 total from FY 2015 total) $1,460,500.
Agreed, but the $1.46 million would have to be immediately plowed back into the classroom with no net savings. Otherwise the educrats would raise a hue and cry over “education cuts” in order to protect their jobs.
Markell would rather hire more intern teachers, or convert teachers to lower-paid charter school teachers, before he would cut the highly paid DOE pencil pushers he installed. Those 14.5 people are his chief lieutenants going out and serving as spokesmen promoting and defending the Markell education agenda.
Puck:
Yes and no.
If the point is to cut the budget, which is what this thread is presumably about, these 14.5 jobs should be among the first to go. And I doubt that anyone other than Murphy and Markell would miss them.
If you’re talking about benefiting education, then go ahead and put more teachers in the schools, but that’s not what we’re talking about here.
“Eliminate 14.5 positions”
The problem with all exercises of this sort is that they characterize things in terms of FTEs and not functions. What the budgets fail to do is articulate the cost of performing functions. So if you eliminate those positions, what won’t get done? Is it important stuff that we would have to do regardless? How will it get done? If you eliminate positions you must eliminate functions. Now if the positions go away and nothing happens, then it was truly waste that was cut. But eliminating positions without so much as a mention of what functionality is being affected is foolish.
Of course there are sometimes when you can’t really tell what the real functionality is without cutting the position. Reminds me of a switch in a house that you don’t know what it does. Sometimes you have to flip it to see what goes off or turns on.
“Of course there are sometimes when you can’t really tell what the real functionality is without cutting the position.”
I can easily envision a position in the DOE with the function “to apply for federal grant money” and (assuming money is fungible) the grant being applied to covering the cost of that position.
Getting rid of the DDOE is something I’ve become okay with. I have no idea what these people do other than make useless work for others. That said, even with mediawatch spotting Anon a first cut he hasn’t added to the list. (And yes, he may not have had time to get back to us, but I doubt he will return with a list since people who cite “waste, fraud and abuse” never do. 😉 )
“Department of Health and Social Services has lagged on reducing fraud and waste in the state’s $1.9 billion Medicaid program.”
“Lawmakers directed DHSS officials in last year’s budget bill to hire an outside contractor for a $500,000 pilot program aimed at fighting Medicaid fraud, abuse and waste. McDowell said he believes the effort could identify up to $26 million in savings.”
That’s a possible $26million. The DHSS had until October 2014, it has not been done, WHY?
This is not just in Delaware, but Medicaid fraud is a National problem.
Gentlemen, people look at taxing the rich as the solution and I agree there are some that have expensive accountants to find was not to pay their fair share.
There are others that are taking that little extra money and investing in other businesses. Other businesses, that a bank might not loan the money, because it’s not proven yet. So, these individuals are willing to take the risk, same as people on the show Shark Tank.
Now, I know some will say the State of DE did that with Fisker, but a private investor will put in safeguards or incentives for that business and might not give the whole ball of wax.
Bottom line, our elected officials need to be held accountable for what they do and to be fiscally responsible.
On a personal note, I enjoy Delaware Liberal and the ideas and banter. Have a great day!
Thanks for reading and commenting.
There are many ways to cut the state budget. Releasing all non-violent drug offenders and replacing incarceration with (when necessary) treatment, would drop the average annual cost of dealing with these folks (productively) from over $30k/year for incarceration (direct and indirect costs) down to less than $9/year. The figure I read for this (it’s two years old) was that it would save the State on the order of $26 million annually.
Then let’s agree that corporations whose annual revenue exceeds the annual tax revenues of the State should not be getting monetary incentives or tax abatements. Eliminating that would save about $30 million annually.
I can’t give you a solid figure for the DIAC (Delaware Information Analysis Center–our “fusion” center) in Dover because Homeland Security refuses year in and year out to release it as a separate budget line item, but my own research suggests that it consumes at least $30-35 million/year that could easily be reduced by about $10 million based on (A) the overall lack of need for the facility (duplicative of Federal efforts) and (B) the featherbedding that goes on within the facility. Likewise we could take a look at the $3.5 million per year that provides funding for the Delaware State Police “navy.”
Then there is duplicative state licensing. Many state licensing boards and bureaucrats have full time jobs doing stuff like licensing the nursing programs at our institutions of higher ed. As a budget-cutting mechanism a few years back almost all of these offices stopped doing state-level reviews if the programs they supervise passed national licensing or accreditation standards. I can think of about a dozen programs from industry and higher ed that fall into this category; what they didn’t cut in the budget was the state positions for the people who are no longer actually conducting the licensing reviews, but are just rubber-stamping the national reviews. About $7 million there.
Raise revenue? People love to talk progressivity (which, apparently, I can’t even spell). What about this? There is a tier of more than 200 high-level state employees who make $150K+. If you take them out of the mix, the average for the other THOUSANDS of state workers drops into the mid-40s. How about we tier the health insurance benefits to require state employees with the high six-figure salaries to pay higher deductibles and premiums on their health insurance BEFORE we go after that same with secretaries and janitors? Back of the envelope says you could save the State several million there.
That’s a notional start, but there’s about $70+ million in cuts or revenue enhancements right there. The problem, of course? No political will to attack issues like these. Schwartzkopf tolerate questioning DSP budget? Never. Markell agree to have highest tier of state employees pay more? Not a chance. Corrections union sign off on serious reductions of the prison population? Unlikely.
Delaware dodged a bullet. Leg Hall would have imploded from the unleashing of this type of common sense.