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.