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The State of Delaware has an operating budget of roughly $6.5 billion. The latest state economic forecast identifies a slowdown in revenue to the tune of $73.8 million, yet the same forecast projects growth of 3% to 5% in our next fiscal year. I don’t envy economists right now, because the federal government shutdown and tariff policies that change weekly make gathering accurate data a real challenge. That said, it seems odd to me that we would rush to adjust our tax code (that is being considered) or deeply slash budgets (that’s not on the table) in response to a reasonably small revenue shortfall.
In a letter we sent to members of the Delaware House Administration Committee last week, we noted that if the state is running a shortfall of $73.8 million for FY26, other options exist to close this gap — options that have been used by Delaware governors and state finance officials over the years. Viable options include the targeted slowing of previously authorized expenditures like hiring and contractual services, General Fund reversions (which DEFAC estimates are $25 million), reverting unused appropriations from one-time supplemental bills, and cash to the Bond Bill.
The tax legislation, HB 255, passed out of committee and will be up for a vote by the entire House later this week.
The impacts of this “decoupling” tax legislation are enormous, especially for the very businesses Governor Matt Meyer, the State Chamber, the Delaware Business Roundtable, and others have openly expressed support for. Startup and small life sciences and technology companies in particular make extensive use of the R&D expensing provisions that this bill seeks to eliminate. These are the very businesses the governor talked about in August when he added a new pillar to the state’s economic development organization, the Delaware Prosperity Partnership.
In short, we’re making success or operating viability for these small or startup businesses much more difficult by passing a bill like HB 255. It’s the wrong thing to do.
Please call or email your state representative and ask them to oppose this bill. And if any of them can accurately explain R&D tax credit expensing and the impacts this will have on small businesses, I’ll buy you dinner!
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