Amid a post-COVID-19 economic rebound, the State of Delaware is flush with cash and some lawmakers are looking to share this good fortune with taxpayers.
According to the Delaware Economic and Financial Advisory Council (DEFAC) – a nonpartisan group responsible for estimating state revenue -- the amount of money available for appropriation increased by $429.3 million over the last two months. The recent forecast continues a trend. The state's revenue estimate has climbed by more than $953 million since October.
Officials are using a portion of the money to prepare for potential future shortfalls. Under Executive Order 21 – which limits spending, linking it to population growth and inflation – the state is expected to end this fiscal year with nearly $844 million set aside as a hedge against an unexpected emergency or economic downturn.
The latest projections indicate state revenue is anticipated to remain strong. In Fiscal Year 2019, state revenue was $4.592 billion. In the current fiscal year (FY 2021), which ends June 30, state revenues are expected to be $5.259 billion. Even with the economy expected to slow after the recovery, revenue projections for the next two fiscal years (FY 2022 and 2023) are $5.152 billion and $5.115 billion, respectively.
These figures do not include the $1.025 billion the State of Delaware is receiving in the federal American Rescue Plan Act of 2021.
At present, there are at least five significant bills awaiting action in the General Assembly seeking to reduce the tax burden on citizens or businesses.
In terms of scope and value, the most significant of these measures is House Bill 191. Sponsored by State Rep. Rich Collins (R-Millsboro), the bill seeks an across-the-board 10% cut to the state personal income tax; would reduce the corporate income tax by nearly 30%; and slash the gross receipts tax – sometimes referred to as Delaware’s hidden sale tax – by 50%. The bill would allow impacted taxpayers to collectively retain more than $420 million annually.
“This is an economic development bill,” Rep. Collins said. “In recent years, Delaware has had one of the worst economic growth rates in the nation. I believe allowing people and businesses to keep more of their own money will jumpstart investment, increase employment, and raise starting wages. The state will reap the benefits of this too, as better economic performance produces higher revenue.”
HB 191, which currently enjoys only Republican sponsorship, is pending action in the House Revenue & Finance Committee.
State Rep. Lyndon Yearick (R-Camden, Woodside) is sponsoring two bills, both benefiting lower income Delawareans. The first, House Bill 172, seeks to temporarily eliminate the state's portion of the realty transfer tax for certain first-time home buyers.
Rep. Yearick’s second bill, House Bill 158, would establish Delaware Resident Low Income Tax Credit. This act seeks to create a $500 tax credit for low income Delawareans. In the case of spouses filing a joint return, the tax credit would be $1,000. Individuals earning between $18,000 and $30,000 annually would qualify, as would spouses filing jointly with household incomes of between $36,000 to $60,000. Additionally, a $110 personal tax credit currently available to certain low-income Delawareans would be increased to $500.
Under the proposal, if the value of the credit exceeded the tax owed by the individual, he or she would receive the remaining value in the form of a tax refund. Presently, this bill has only attracted the sponsorship of Republican legislators. It is awaiting consideration of the House Revenue & Finance Committee. The cost estimate for the legislation has not yet been completed.
“I am committed to supporting our working poor with my bills to reduce the realty tax, create a new tax credit, and increase an existing personal tax credit,” Rep. Yearick said. “These proposals encourage work, offset the tax increases we implemented in 2017, and support individuals and families.”
When the state faced a budget deficit in 2017, lawmakers enacted laws increasing the tax burdens on seniors and homebuyers. State Rep. Mike Ramone (R-Pike Creek South) has introduced bills to repeal both statutes.
House Bill 108 would restore the $500 senior real property tax credit. Four year ago, the credit was cut to $400. A fiscal note completed last year reveals the bill would return about $4.4 million annually to qualifying Delaware seniors. The measure has bipartisan support and has been pending action by the House Administration committee since late February.
Rep. Ramone’s second proposal, House Bill 71, would decrease the realty transfer tax in Delaware by 25%. In 2017, the tax was effectively raised from 3% of the purchase price of a property to 4%. (Local governments are responsible three-eighths of this total, with the state accounting for the remainder.) This bill would reset the state’s take to its pre-August 1, 2017 level, restoring the effective combined realty transfer tax to 3%.
When fully implemented in FY 2024, HB 71 would allow homebuyers to collectively keep an estimated $83 million. So far, only Republican legislators have sponsored the legislation. It has been waiting for action in the House Revenue & Finance Committee for more than four months.
“These bills are two initiatives that I have been relentlessly fighting for over the past few years,” Rep. Ramone said. “With an extraordinarily improved revenue picture this year, there should be no reason to delay implementation of either proposal.”
