A $2 Billion Gap

MESSAGE FROM THE PRESIDENT

February 3, 2025

Delaware is highly dependent on franchise tax revenue, which is largely paid by out-of-state companies incorporated here. It accounts for one-third, or $2 billion, of the annual state budget of $6 billion. If this revenue were to suffer losses, where would the General Assembly make massive spending cuts or raise taxes to fill that shortfall?

Consider this economic reality: roughly 70% of gross domestic product (GDP), better known as “the economy,” is fueled by consumer spending, and that 70% is disproportionately the result of spending by people ages 18 to 45. They’re renting apartments, buying homes, paying for child care, shopping at home improvement stores, and more.

Unfortunately for Delaware, it has an older population and, in fact, is the fifth-oldest state in the nation. A substantial percentage of its population is now beyond their peak spending years, making a sales tax margianlly viable. In fact, a sales tax means our retail sector loses the very advantage it's held over surrounding states for decades.

The numbers look worse when you consider the size of succeeding generations, as evidenced by declining birth rates over the past 30 years. Statewide, there are about 10,000 high school seniors this year. Fewer and fewer people entering the most productive and high-spending years of their lives means a shrinking tax base. Many state spending habits were created when the population was booming, but now that’s changing. Yes, Delaware’s population is growing, but not in ways that will fill a $2 billion gap.

News You Can Use

The week gets started with construction figures from December and January auto sales. On Tuesday we’ll see data on December job openings and December factory orders. The ADP employment report for January is released on Wednesday, as are U.S. trade deficit numbers for December. The week wraps up Friday with U.S. employment figures for January, including the unemployment rate and hourly wage data.

This is a very busy week for companies hosting earnings calls. We get started today with AECOM, Tyson Foods, Cabot, Clorox, NXP Semiconductors, and many more. Tuesday calls include Aramark, Archer-Daniels-Midland, Ball Corp., Centene, Merck, Pfizer, UBS, Alphabet, AMD, Columbia Sportswear, FMC Corp., Simon Properties, and Voya Financial, among others. Walt Disney headlines the Wednesday calls and is joined by Fiserv, Johnson Controls, Corteva, Hologic, Moelis, Old Dominion Freight Line, T. Rowe Price, Uber Technologies, and more. Amazon, Air Products and Chemicals, AstraZeneca, Hershey Foods, Mohawk Industries, Pinterest, Fortive, and Newell Brands are among a long list of calls scheduled for Thursday and Friday.

Michael J. Quaranta

President

Delaware State Chamber of Commerce

Uniquely Delaware

How Delaware's Labor Force Participation Rate Compares

Delaware’s labor force participation rate stood at 59.08% in September 2024, trailing behind neighboring states and the national average of 62.9%. As we compete with nearby states for talent and economic growth, a lower participation rate has real implications—fewer people in their most productive and high-spending years. Our Delaware Competitiveness Bluebook highlights workforce data and other key economic indicators like this. Request your free copy >

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