A Revenue Task Force: The Result of Tax Cowardice and the Passing of the Buck
Even though the economy is improving, and thus tax revenues that states receive are rising and returning to pre-Second Great Depression levels, 16 states are still projected to run budget deficits in next year or two.
Those gaps range from lows of $17 million in Vermont and $34 million in Rhode Island to $4 billion in Washington State over the next two years and $2.2 billion in Wisconsin next year alone. The gaps come even as tax revenues are rebounding. The nonpartisan Rockefeller Institute reported on Thursday [pdf] that tax revenues rose in 41 states in the third quarter over the same period last year, led by a 5.9 percent increase in sales tax collections and a 4.3 percent rise in personal income taxes. The growth isn’t strong enough to make up for the increasing costs states must shoulder. Scott Pattison, the executive director of the National Association of State Budget Officials, said rising Medicaid and health care costs are to blame in many states.
Delaware had a $19.2 million deficit into Fiscal Year 2015 that was resolved in the budget passed in June 2014 (remember, states actually have to balance the budget, with revenue risers or spending cuts or both when there is a revenue deficit). This year?
The Delaware Economic and Financial Advisory Council (DEFAC) estimates the state will have nearly $2 million dollars more in 2016 revenue than it projected in September. The forecast also projects the state having nearly $10 million dollars more to work with in its fiscal 2016-spending plan. […]
DEFAC also projects a nearly $17 million dollar drop in revenue for the current fiscal year, but [state budget director Ann] Visalli says that is not an immediate concern. “We’ll have enough time to manage through that between now and the end of the year and we’re still projecting a positive cash carry forward,” said Visalli. “So, we’re OK.”
Monday’s estimate is the final DEFAC revenue projection before Gov. Jack Markell’s administration begins to craft its proposed budget. Markell presents that spending plan next month.
Boy is that confusing. Which is it? Are we $17 million down in revenue and thus do we have a $17 million deficit? Or do we have a $12 million surplus? Or is it both, and that is why Ann Visalli is not worried. Meaning, that yes, we are $17 million down in the expected and forecast revenue that state was to receive from tax payers, but the state has received $12 million in unexpected revenue/income/fees from other sources, and thus we are really only $5 million down.
Now, longtime readers will know my frustration with Delaware and its revenues. We have what is essentially a flat tax rate system for the middle and higher brackets of income. If one person has $60,000 in taxable income and another has $600,000 and another has $6 million, they all pay exactly the same tax rate. But we can never… NEVER!!!!!! … raise taxes on those at the higher levels, because, you know, they are job creators and it will hurt their fees fees. So we have to scrounge around every year, waiting desperately for every DEFAC forecast to come out with good news. We have to talk about raising regressive fees and taxes, like the gas taxes, which fall disproportionately on those who least can afford to pay more. We have to talk about deeper and deeper spending cuts.
And we have to resort to a Task Force to tell us what is wrong with our “revenue structure.”
State officials used Monday’s meeting of the Delaware Economic and Financial Advisory Council (DEFAC) to announce a task force is being formed to examine how the state‘s bottom line is built. State Finance Secretary Tom Cook says concerns that 56 percent of the revenue feeding Delaware’s General Fund come from static sources prompted the decision to form the panel.
“You’ve heard the statements where the state’s job rate, growth rate is out-pacing the nation, but in turn the revenues have not accelerated as fast. And so, this is a great way to look at that 56 percent of the revenue sources that are inelastic and to see what recommendations come up..”
House Minority whip Deborah Hudson (R-Fairthorne) says it’s the right time to delve into these issues. “I think its an excellent opportunity and I think you’re going to get the bold innovative ideas from the non-government members,” said Hudson. “And I think they’ll consider things such as changing the deal between the casinos and the state, maybe changing the escheat laws. Really just shaking the tree – all new ideas.”
It will be nice for the Task Force to come back with actual Revenue Ideas that will actually raise revenue (i.e. no suggestion of tax cuts), and it will be a great idea for the state not to rely on gambling income as static part of the revenue side of the budget, since gambling income has fallen some 30 percent since 2004. And that number will continue to drop as more and more states open up more and more competing facilities. What we should do is renegotiate our end of the deal that greatly reduces the amount the state receives from the racinos while forbidding any future future bailouts of them. We should also establish a progressive tax rate structure among all tax brackets, adding more to the top end.
But I suspect the task force will come back with proposals for a gas tax and a sales tax, both regressive taxes, and both unpopular, which will “force” the Governor to look to spending cuts to education and Medicaid. That’s the Delaware Way.
Last year at this time Markell came out and said that rich people would leave the state if their taxes are raised. That is flat out horseshit, with no basis in fact. But, heck, it is a handy GOP talking point, so naturally our Democrat Gov uses it.
Wasn’t he supposed to be “progressive” and “not establishment” when he ran in 2004? I was politically naive back then…
I though rich people moved and incorporate here becuase the state is kind to corporate crooks and has super low property taxes for ocean front 2nd homes?
MikeM2784,
I know. He tricked us all.
Well, we can’t raise those top rates, DD.
That would be ‘wealth redistribution’.
Exactly what kind of magic solution does this ‘task force’ expect to come up with? Something new under the sun? (BTW, kids, the composition of task forces like this one ultimately determine whatever recommendations emerge. If ‘wealth redistributors’ need not apply, those who have already had the wealth redistributed to benefit themselves will be the only beneficiaries.)
And you can bet that, whatever they come up with, which will be next to nothing, Markell will be outta Dodge and the can gets kicked down the road to yet ANOTHER governor. Which is just what Minner did.
History, like mediocrity, repeats itself.
People move to Delaware for lower taxes. Its not too hard to fathom when the annual property taxes here are close to a monthly payment in NJ or NY.
I wager that this commission will conclude two things that are undeniably true: (1) real estate taxes are unduly low; and (2) reassessment is overdue.
Perhaps it will have the guts to say that (3) the retirement income exclusion serves no purpose and should be repealed.
John,
Agreed that your statements (1) and (2) are undeniably true but neither an increase in real estate tax rates nor an overall reassessment would have any impact on state revenues since, as you certainly know, the state does not levy property taxes. Further, while it’s possible this commission might agree with what is factually obvious, the likelihood of the General Assembly authorizing a reassessment is somewhere well below nil.
Everything mediawatch has said with the addition the State would NEVER authorize a reassessment and have to be the ones to pay for it. They are loving it’s the counties’ football. What they can leverage are the exemptions. We were quite successfull (depending how you look at it), bugging the legislature to PLEASE don’t just let the seniors move here, and qualify for all the automatic freebies we afford our seniors. If you remember, they now must be a resident 3 years before exemption w/ property taxes, or credit. I think we could scrutinize more things like that. They are already saving eegads of $ just moving here–and then it was like we gave them a welcome check too!! And tell me……am I the only person in Delaware who doesn’t qualify for a free or reduced or whatever it is Lumpy Carson and kind are always doing with state park fees, surf fishing permits, and various other niche mutual benefit for ALL state sites??? How about changing that little goody to select days of the summer, or a certain day of the week????
DE is the best place to retire? Really?
Didn’t make Forbes top 25 in 2014
http://www.forbes.com/pictures/mjh45mijf/moving-on-in-life-2/
or
Time
http://time.com/money/collection/best-places-to-retire/
or
AARP
http://www.aarp.org/home-family/livable-communities/info-07-2012/best-places-for-low-cost-retirement.html
Maybe, stop giving the money away to some of these companies. Cut costs, try just a little. Maybe the Gov., should take a pay cut! The 8th highest in the nation.
http://ballotpedia.org/Comparison_of_gubernatorial_salaries
Time to start trimming the fat!!!
I approved of the state’s current tax structure where everyone pays the same percent on every dollar earned. What I don’t agree with is the separate classification of income. All income should be ordinary income. Capital gains is still income and I do not agree with taxing it a lower rate. The disparity in what wage slaves pay and those who live off of investments is ridiculous. Income is income is income regardless of the source.
Regarding fees, the state should make them uniform with no exemptions or reductions. If you want to pretend to surf fish, then it should be the same rate regardless of who or what you are.
You continually fight the wrong battle on taxation because an income of $1M already pays more in taxes than someone making a $1K. 10% of $1M is $100,000. 10% of $1K is The focus on the rate is $100. $100,000 is way more than $100.
Now if you want to focus on deductions (higher incomes are likely to have more deductions) or on the classification of income (ordinary income vs investment income), then you will find me supporting your cause.
The progressive taxation meme is not going to win you very many supporters. Don Quixote fought those battles and lost. Treating all income the same would go a long way towards reducing deficits and leveling the burden. It has the added advantage of being winnable because most people either are not affected by the eliminating the benefit of investment income taxation policy and also can grasp the inherent fairness of taxing those who earn their income by using money to make money the same as the plumber who earns income their income with their hard work.
But go ahead and continue the progressive taxation battle cry cause it’s been so effective thus far.
The deliberations of this body will underscore the importance of Bryan Townsend, who belongs even higher on the MVP chart because of the real, not symbolic, fights that he confronts almost daily. Battling the Chamber is a wearying process.
WOW, really cut a number of comments on this issue……….
Although they have been trained to vote against their economic interests, there are more poor and middle class voters than rich voters. Someone should run for governor on this:
“All income should be ordinary income. Capital gains is still income and I do not agree with taxing it a lower rate. The disparity in what wage slaves pay and those who live off of investments is ridiculous. Income is income is income regardless of the source.”
the state should make (fees) uniform with no exemptions or reductions. If you want to pretend to surf fish, then it should be the same rate regardless of who or what you are.”
As an after thought it occurred to me that the 1% doesn’t even live off of ordinary wages. I mean, when’s the last time Mitt punched a clock?