A Tale of Two Budget Proposals — Part II
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.
Tags: Delaware Budget
This is good stuff. Kowalko continues to distinguish himself as one of the heavy lifters in LEg Hall.
John seems to believe that he is being paid to do a job. And nobody in Dover works harder.
Bonini, on the other hand, seems to think he’s in Dover to collect a check and grandstand for the next election.
It’s not just Bonini. Most of the party has decided to posture as tightwads. The only part of their annual posturing that’s missing this time is their call for more tax cuts.
Remember when they cut the gross receipts tax a couple of years ago? Where’s Eleanor Craig to explain again how thats going to stimulate our economy to robustness?
I just stole one of Geezer’s points while one with AL – who wrapped up with a very generous plug for DL.
Tightwad is actually AOK. I just ask that they be up front and honest about the numbers and what government they plan to eliminate. This is the politically tough stuff — particularly since Rs want to eliminate extremely popular portions of the government. Get support for your positions the old fashioned way. But for people who constantly fetishize the way that private business operates, they pull alot of stunts you couldn’t get away with in the private sector. Like a budget proposal with no numbers.
ps.
I heard part of your talk with Al this AM, Jason and John Kowalko was on this AM (only heard parts of that too). It is very cool that Al is picking up the activity on his blog over at WDEL.
Great content (like this post) is the key.
It is up to progressives to make Kowalko’s proposal part of the calculus for this year. Contacting the Governor and asking him to incorporate some of these concepts is essential.
The Delaware Way folks have largely marginalized Kowalko in Dover. They used to do the same thing to Harris McDowell back when he was a true progressive (and, yes, there was a time when he was…).
They marginalize b/c it is in their self-interest and the interest of the most powerful lobbyists to do so. That way they can ignore truly progressive ideas with dismissive snickers, and all the schoolyard bullies join in the laughter.
With a presumably progressive governor and an unprecedented budget crisis, there will never be a better time to have such influence on the budget, particularly with the Delaware Way crowd turning up their noses at anything constructive.
Contact the Governor and ask/tell him to plug in as much of John’s concept as possible.
Time to ‘unmarginalize’ the true leaders. And to identify them.
Thanks, Jason!
Is anyone going to Rep. Kowalko’s public meeting tomorrow?
Also, it would be interesting to hear some reaction from other legislators to either of these proposals, so if you call and ask, let us know what you hear.
Bulo, You succintly described the ambience -marginalize the leader(s), snicker, point, and join in laughing like schoolyard bullies–it’s 8th grade all 0ver again, and they get to run the state.
Some days it’s like watching “Porky’s”, and somedays it’s like watching “Mean Girls”.
JC-In ‘bulo’s time in Dover, there has never been anything worse than seeing the Bobby Byrds, Gary Pattersons, and Joe Farleys chortle about short-circuiting something worthwhile–and it happens all the time. And now, they’ve added Wayne Smith to the toxic lobbyist mix.
It sounds like an interesting proposal and I think it needs more attention. I think adopting some of these proposals could really help with the state budget crisis, especially a more progressive state income tax. I’m not certain about all the business proposals in there. At least this is a real proposal!
I am considering a “Middle Way” post. Not in the middle of Kowalko and Bonini, but the middle of Markell and Kowalko.
I think Kowalko has, in some ways, called Markell’s bluff. Jack has said, find me the alternatives, but unless you have a way to make up the difference, the cut is staying. Now Kowalko has found alternatives.
Kowalko at least has provided a list to choose from. Some of the fee increases are perfectly reasonable.
Is there really $40 million annually available from estate taxes? I never knew.
Raise franchise tax? Pro-business types would oppose this, and they might have a point.
Gas tax – it would only be worth the fight if the increase was earmarked for roads or public transit.
Geek’s got a good idea. The Beast Who Slumbers doubts that even Kowalko expects to get all, or even most, of what he proposes.
But incorporating some of John’s sustainable elements into the final budget not only adds some progressivism to the equation, but begins to restore fairness and equity to the process, both of which have been institutionally weakened over the last 33 years.
I don’t understand how Jack can insist on an 8% pay cut for workers w/o considering the increase in corporate tax cap. Once again, the argument against upping our corporate take — like the refusal to consider a sales tax — is based not on any kind of quantitative study, but on unquestioned conventional wisdom. “Some corporations will leave.” Really? How many? Which ones? Where’s the study you commissioned that proves anything you’re saying?
If you look at Kowalko’s proposal, it is pretty clear that you can pick and choose one option or a few of the options. If all of his options were implemented, revenue generated would exceed the revenues needed to eliminate the pay cuts. So I suspect that Bulo is right — Kowalko doesn’t expect that all of this will be adopted. But it does put real numbers on the table that clearly can be measured on how they can alleviate the pay cuts.
Kowalko’s proposal, in addition to being more equitable than the proposal put forth by the governor, is sustainable.
Geezer,
You are absolutely correct. Markell is laying the budget woes on workers, especially the lower paid one (wow, what a PROGRESSIVE!) rather than corporations and those better able to pay.
Hmm.. not one complaint on how raising some of these mandatory fees hurts small buisnesses.
Not one comment mentioning the reason some of these corporations and LLC’s are based in Delaware is because of the low fees and taxes afforded to them.
Ever hear an”Encorporate in Delaware!” radio ad? That changes to another state when fees go up.
It is easy to think of big banks when you talk “corporate” but you also have alot of small business LLC’s and midsized business LLC’s and Corporations that are struggling to justify keeping that extra employee, and an extra $50 here and an extra $25 there doesn’t make that any easier.
Alot of these tax increases bite the hand that feeds Delaware’s coffers. Increase these fees and you will see a drop in the number of reincorporations in the next year, causing the net balance to equal out.
Don’t get me started on the income taxes. I would much rather have some sort of consumption tax like the gas tax or a -dare I say- sales tax before we confiscate more money by force from people’s paychecks. At least give me the option of consuming, and paying into the system.
Seriously, is the “Tax Free Shopping” thing working? Has anyone looked into this? Who drives to Delaware to buy low tax goods (other than cigarettes?)
How does the Rainy Day Fund get replenished? What happens when there is a state emergency (like some sort of natural disaster) and 25% of it has not been paid back yet?
I would much rather see a heavily bloated government cut the fat (which I would provide examples of if the budget was somehow ledgible to the layperson *ahem* open gov’t *ahem*) than to sap more taxes and fees off of an already struggling economy.
To be clear, I would not rather see the 10% cut in pay. I would rather see a cut in wasteful programs and departments, optimized spending, and a change in attitude at the governmental level about where this money comes from.
And you do know that 2/3 of the budget cuts do not come from salaries, right? There is alot that is being cut back — which is not to say more cannot be done — but there is alot of cutting on the table.
I’d like to hear why businesses ought to be shielded from contributing to the fix while citizens are not. You should also remember that taxes are going up for most people faster than their wages are. And the state gets about a third of its revenues from PIT.
There isn’t alot of reason for citizens to bear the brunt of closing of the budget gap.
Seemed like everyone was saying “Yay! Fee Increases!” without contemplating the side effects.
Not saying businesses should be shielded. You have to remember that businesses are employing your citizens, and businesses only can pass the buck. The added cost won’t be absorbed. Bottom line is that too many additional costs and one more employee becomes less affordable, more unemployed persons mean more added costs to the state.
You are effectively hitting the citizens at both ends. Small business owners are citizens also.
(PIT is going to be a standard Libertarian talking point. Taxes taken by force in favor of taxes voluntary, goes with the territory)
I don’t think that anyone here is cheering the fee increases, but cheering the fact that someone was thinking of a way out of the pay cuts. It is possible that none of this will happen, but when we are in a crisis, everyone needs to pitch in, including businesses. And certain types of fees and taxes do get passed on — not to employees but to the people buying the stuff. It is called overhead. This is harder for smaller businesses to do than larger businesses, but this is not always about whether someone is employed. Especially in an environment when everyone is getting hit with new fees or taxes.
The Libertarian voluntary PIT thing would work if you could get those who won’t pay to stop using the roads.
We would only need a 3.4% sales tax to completely replace the Personal Income Tax.
http://www.mourningconstitution.com/?p=877
The Libertarian voluntary PIT thing would work if you could get those who won’t pay to stop using the roads.
We used to have toll booths on the in-state I-95 exit ramps… Pete Du Pont took them down, IIRC.
Then when we built out Bear and Middletown I-95 became a local commuter road and we add a lane or two every so often, bottlenecking the whole East Coast and sucking transit money away from the rest of the state.
I didn’t say a voluntary PIT. PIT by it’s very nature is not voluntary. I would advocate for a voluntary form of taxation in it’s place.
Like a sales tax. 3.4%
Gang, I like much of what Boninni and Kowalko add. However, from a small business owner’s perspective may I point out:
Yes, Brian we do employ our local citizens
We are a mom and pop shop who has no exclusion from “business”….hence
We pay gross receipts tax both on the state level, and now the municipality went for that one and asked for the same “tax”. When our books were disclosed, the municipality backed off and said–geesh, there are many expenses to being a lone business owner, and instead enacted a “flat rate” for the privilege.
Now in our business, we see many Medicaid children at the reduced state rate. We are committed, and feel responsible to do this for the underserved, yet deserving. Hugely responsible. However, along with that just recently came an IMMEDIATE reimbursement cut rate of 5%. No July 1 start–nothing–work in the pipeline, next check cut 5%. We now operate at a 4% profit margin to see that child. That’s if that child shows. A no-show or late cancel, can put us in the hole, with the overhead caused of an empty chair,in continuing to do business this way with the State. An increase in our small business tax may be a decision maker on many levels. I’m just asking you guys to think about some of us,who have no problem sharing, and serving–but some of us it is not just an 8% cut, or reduced paid vacation days. For some of us, it is reduced reimbursement, AND an additional tax assessment, AND on and on….depending on which guru you listen to. Some of us aren’t employed in a vaccuum, and there is greater overlay. Thanks.
Joanne – on the tax increases above your business would pay an additional $90 per year. And I wouldn’t be surprised if the next round of cost-saving measures don’t cut another 1% out of your reimbursement.
And under the LiberalGeek plan, you might only pay that $90 for one year.
Some of us aren’t employed in a vaccuum, and there is greater overlay.
Most of us are not employed in a vacuum — and the reason why this hits everyone in ways we don’t like is largely due to the massive size of the budget hole.
The reimbursements for Medicare and Medicaid are a real mess and the persistent chiseling away at those fees is the quickest way to eliminate these programs without actually lineing it out. If the state’s costs are not decreasing, I have no idea why they thing medical costs are decreasing. In many ways, I think that the reimbursements problem is a bigger and a longer term issue that the budget…
Geek, Just tell me where to send the 90 bucks to save the budget–but I am not signing up for any bail-out plan.
I only sent over about 15 million in savings suggestions, and no one has to budge. Here’s hoping. All extras.