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Archive for the ‘Tax Increases’ Category

By Joanne Butler, Senior Fellow at CRI’s Center for Economic Policy and Analysis

Although many folks may not ever feel free from government these days, according to the Tax Foundation national “Tax Freedom Day” occurs on April 9th and the date for Delaware taxpayers is April 11th.  Freedom Day is the date at which taxpayers will have earned enough money to pay this year’s tax obligations at the federal, state and local levels.  It takes Delawareans 100 days to just pay their government tab.  When compared to the dates for other states, Delaware ranks 20th, with the worst ranking (#1) going to Connecticut (April 30) and the best ranking to Alaska (March 23).  The following are other current Tax Foundation rankings for the First State.

State and Local Per Capita Tax Burden (FY2008):  With a ranking of 16th, Delaware has a state and local per capita tax burden that is above the median (Wyoming, at #25).  When compared to its neighbors, Delaware has the lowest ranking.  Delaware also has a better ranking than Rhode Island (the other small East Coast state), and Virginia, which traditionally is viewed as a low-tax, business friendly state.

State

Tax Burden:

State & Local

Ranking
Connecticut $7,007 1
New Jersey $6,610 2
Maryland $5,669 4
Virginia $4,669 9
Rhode Island $4,533 10
Pennsylvania $4,463 11
Washington State $4,334 15
Delaware $4,253 16
Wisconsin $4,194 17
Wyoming $3,714 25

State Business Tax Climate (2010) :  Delaware (#8) significantly outperformed its neighbors with regard to its business tax climate.  New Jersey is dead last (#50), with Maryland not far behind at #45 and struggling New York is #49.

State Rank
South Dakota 1
New Hampshire 7
Delaware 8
Washington State 9
Virginia 15
North Dakota 25
Pennsylvania 27
Maryland 45
New York 49
New Jersey 50

State and Local Tax Burden as a Percentage of State Income (FY2008):  Again, when compared to its neighbors, Delaware has a lower state and local tax burden as a percentage of state income.  New Jersey has the highest state and local tax burden as a percentage of state income.  Delaware ranks just above the median (Kentucky at #25).

State State & Local Taxes as

Percent of State Income

Rank
New Jersey 11.8% 1
Maryland 10.8% 4
Pennsylvania 10.2% 11
Virginia 9.8% 18
Massachusetts 9.5% 23
Delaware 9.5% 24
Kentucky 9.4% 25

State Debt Per Capita (FY2008):  Delaware’s state debt per capita is in the top 10 of the nation; it is higher than its neighbors, outpacing New Jersey by $471.  Significantly, Delaware is $3,332 above the median (Pennsylvania at #25).  This is a result of Delaware in recent fiscal years covering the gap between spending and revenues by floating debt.

State State Debt

Per Capita

Rank
Massachusetts $11,024 1
Connecticut $7,882 4
Delaware $6,574 5
New Jersey $6,103 6
Maryland $4,086 14
Pennsylvania $3,242 25
Virginia $2,820 31

Joanne Butler, Senior Research Fellow

Center for Economic Policy and Analysis

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Delaware proves again, lower top tax rates increase revenue.  A study by the author comparing top income tax rates to inflation adjusted income tax revenues from 1988 to 2008 shows revenue increases as tax rates drop.  Revenue increased about $189 million/yr or 25% when the top tax rate decreased from 7.7% to 5.95 %.  The study uses inflation adjusted dollars.  Last year the top tax rate increased to 6.95%.  On a prorated basis, we would expect the increased rate to reduce income tax revenue by about $100 million/yr.

Higher expected income tax revenue is the bright spot in The Governor’s proposed FY2011 budget but the estimates are likely overstated.  Economic growth and job growth are closely tied to small business entrepreneurs being able to come up with capital to start or grow business and with their willingness to take the risk.  Capital, whether from cash or loans, ultimately comes from after tax profits which either provides the cash directly or is needed to make the loan payments.  Last years increased tax rates from state and local governments will soon be followed by federal increases all working to lower capital for business growth.  Uncertainties about tax rates and ever increasing regulation add immeasurably to risk and discourage entrepreneurs.  This combination of deterrents to business growth act to  lower income tax revenues.    Having started multiple businesses both within a large corporation and as an entrepreneur, I know of what I speak.

It appears all Delaware tax revenue streams will provide little growth opportunity.  It is time to get serious about designing state government to run at a permanently reduced size.  We need a serious discussion about the role of government and how to limit its size.

David T. Stevenson

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Delaware joins 10 other Northeast and Mid-Atlantic states in pact to improve air quality and reduce greenhouse gas emissions from fuels

DOVER – Gov. Jack Markell joined the governors of 10 other Northeast and Mid-Atlantic states today in announcing a Memorandum of Understanding (MOU) among the states that underscores their commitment toward developing a regional Low Carbon Fuel Standard in a regional effort to reduce greenhouse gas emissions from fuels for vehicles and other uses.

“We need to address the challenges we are facing with solutions that improve our environment and create jobs,” said Gov. Markell. “I am pleased that Delaware has again joined other states in addressing air quality and carbon emissions. This program will spark investment and innovation in alternative fuels and electric cars like those that Fisker Automotive plans to make in Wilmington.”

A Low Carbon Fuel Standard (LCFS) program is a market-based, fuel-neutral program that would apply to the transportation sector, and potentially apply to fuels used for heating buildings. A regional standard is expected to spur economic growth related to development of advanced technologies and green energy jobs. A low carbon standard also has the potential to reduce transportation-related greenhouse gas emissions, which represent approximately 30 percent of emissions in the region; reduce regional vulnerability to petroleum price volatility; and facilitate the long-term transition from petroleum-based fuels in the transportation sector.

“Transportation fuels account for a significant portion of Delaware’s air pollution and 25 percent of our state’s and our nation’s carbon dioxide emissions,” said Department of Natural Resources and Environmental Control Secretary Collin O’Mara. “A low carbon fuel standard is an innovative market-based approach that will find low-cost solutions to lowering carbon emissions and spurring local investments, and we’re pleased to be working once again on a regional level to address this important issue.”

Signing the Memorandum of Understanding along with Gov. Markell were: Gov. Jodi Rell of Connecticut, Gov. John Baldacci of Maine, Gov. Martin O’Malley of Maryland, Gov. Deval Patrick of Massachusetts, Gov. John Lynch of New Hampshire, Gov. Jon Corzine of New Jersey, Gov. David Paterson of New York, Gov. Edward Rendell of Pennsylvania, Gov. Donald Carcieri of Rhode Island and Gov. Jim Douglas of Vermont.

Under the Memorandum of Understanding, the states agree to analyze low carbon fuel supply options, determine the feasibility of achieving a range of reduction goals, including a 10-percent reduction in carbon intensity of fuels, and develop a framework for a regional Low Carbon Fuel Standard to ensure sustainable use of renewable fuels in the region. The Memorandum of Understanding also calls for a study to examine the potential economic impacts of any program moving forward.

The states have already demonstrated the success of regional emissions reduction programs with the Regional Greenhouse Gas Initiative (RGGI), which covers greenhouse gas emissions from power plants. A regional program to address transportation and other fuels is considered prudent and efficient among the signatories given the interconnected nature of the fuel distribution system in the Northeast and Mid-Atlantic region.

More information on the LCFS work in the Northeast and Mid-Atlantic region is available at:  http://www.nescaum.org/topics/low-carbon-fuels

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Should the state, county or municipalities sell ad space on government-owned property?

Last month, the Caesar Rodney Institute put forth the idea as a suggestion for state government to consider in a paper outlining ideas on how to prepare for the 2010 legislative session. I’m glad to see that New Castle County is considering the idea and hope that other government entities consider it as well.

Selling the ad space is a terrific outside-of-the-box way of raising revenues and presents a viable alternative to other revenue generating measures.

Beyond selling ads, government should consider selling naming rights for publicly-owned property. Indeed, there are many instances where states and cities have sold naming rights to buildings, structures and land.

Most notably, government-subsidized sports stadiums have their initial costs offset by corporate sponsorships. Think of Lincoln Financial Field and Citizens Bank Park in Philadelphia or M & T Bank Stadium in Baltimore.

Granted, Delaware doesn’t have a venue that would equate to these heavily frequented venues, however, we do have bridges, highways, parks and other property. And while the potential revenue likely won’t be in the tens of millions, every little bit helps in generating revenue, especially when such practices can replace economically detrimental measures such as tax and fee increases.

During the current recession, the idea of naming rights and selling ad space have become more popular. Recently, New York City’s M.T.A. requested bids for five-year term sponsorships of tunnels, bridges and roadways.

Is selling the naming rights of the Roth Memorial Bridge, the Indian River Bridge, the new rest stop on I-95 or Route 1 a reasonable way to raise funds? Why not? There really isn’t any downside to this as there aren’t negative public outcomes of such a practice.

However, it is recognized that private entities may not want to be a part of a roadway that is often congested or where a traffic accident has occurred, but to what degree…its hard to tell. One can envision the rush hour traffic report stating, “A five mile backup on the WSFS Highway,” or “another accident on the ING Bridge.” Would this be bad advertising and marketing?

Further, would folks buy into calling a landmark such as the Roth Memorial Bridge by a new name?

Again, its hard to say. At the very least selling ads in parks and on other public property is a step in the right direction and may be more palatable to the public.

More evidence on the feasibility of these ideas persist. A recent New York Times article on the renaming of four subway nexuses in Brooklyn includes evidence that advertisers may not get enough bang for their buck, as people need a connection to be effectively advertised to. Allan Adamson of the Landor Advertising firm said, “To be effective, the viewer needs to understand the relevance of the ad, to rename the 59th and Lex stop the McDonald’s stop — it ain’t going to work. I don’t think it will stick.”

This should not discourage any advertisers, though, as advertizing is less than a certain science.

Other precedents include a recent case in Rhode Island where state legislators have proposed the renaming of the Mt. Hope Bridge to stop the re-institution of a heavy toll for bridge use. Rep. Douglas Gablinske of Warren and Bristol counties said, “I don’t care if we call it the Mt. Hope Bridge, the GTech Bridge, the Dunkin’ Donuts Bridge, what’s important is that tolls not be re-instituted. I think that we could raise significant money by naming the bridge after corporate sponsors.”

The city of Wheeling, West Virginia sold the naming rights for its Wheeling Civic Center to Wesbanco, Inc. for $2.3 million for 10 years.

The Norfolk rail system planned to raise up to $29 million dollars to help with operational costs by selling naming rights to stations and rail lines.

San Francisco has talked about selling the naming rights for the famous rail cars. This coming after a nearly $140 million deficit from state and city authorities.

And, the previously mentioned New York City M.T.A. example where Barclays Bank purchased naming rights to subway stations in Brooklyn for $4 million August, 2009.

New Castle County is considering a wonderful idea. While the concept is not going to solve the problems we are currently in, it can be part of a solution for passing budgets and reforming government. It’ll be interesting to see the public’s reaction to the proposal and to see if this practice takes off in Delaware.

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It has happened. Well, it’s close to happening. The Delaware House of Representatives voted to increase a large handful of taxes and fees last night in their effort to close the state’s $800 million budget gap.

The legislators will tell you that the effort to close this gap has been an honest mix of spending cuts and tax increases. Not true. From day one, the plan was to raise taxes, with our elected officials only making the least painful of budget cuts.

The increases total $211 million in tax and fee increases. These bills still need to be passed by the Senate. And, there may be more hikes coming today in the last day of the session. As a reminder, these tax and fee increases are purportedly necessary to close the budget gap in the $3.09 billion budget that was introduced for the first time publicly yesterday. That’s right, the 241 page bill was released yesterday to be voted on today.

The increases:

  • Personal Income tax
  • Tobacco tax
  • Gross Receipts tax
  • Public Utility tax
  • Elimination of the exemption for lottery winnings
  • Re-establishment of the death tax
  • License/Document fees
  • Litering fees

One in four Delaware taxpayers are impacted by these increases. As reported in The News Journal, “State labor groups and Democratic Caucus leaders say balancing the budget through hasty cuts – rather than higher taxes – could seriously cripple state government.” (Montgomery, June 28, 2009)

What about hasty tax increases?

What about the obvious cases of egregious spending? (see Mike Chalmers article on the still unused MBNA building purchased for $13.4 million two years ago).

Early this year, Reason magazine noted that a good way to measure fiscal discipline is to calculate the rate of government spending growth versus the rate of population growth plus inflation. According to the U.S. Census Bureau, between 2000 and 2008, the population of Delaware grew by 10.2%. Over the same period, there was a 21% increase in inflation. Combined, these figures suggest that Delaware’s state budget growth should have been around 31%. Over this period the budget grew by 41%.

You can still let your voice be heard on the tax increases. To help put a stop to the fiscal recklessness in Dover, contact the State Senate TODAY! You can also contact Governor Markell at 302-744-4101.

Senator Harris McDowell (1)
Office: 302-744-4147
harris.mcdowell@state.de.us
Senator Margaret Rose Henry (2)
Office:  302-744-4191
margaretrose.henry@state.de.us
Senator Robert Marshall (3)
Office: 302-744-4168
robert.marshall@state.de.us
Senator Michael Katz (4)
Office:  302-744-4135
michael.katz@state.de.us
Senator Catherine Cloutier (5)
Office: 302-744-4137
cloutiercathy@aol.com
Senator Liane Sorenson (6)
Office: 302-744-4136
liane.sorenson@state.de.us
Senator Patricia Blevins (7)
Office:  302-744-4133
patricia.blevins@state.de.us
Senator David Sokola (8)
Office: 302-744-4139
david.sokola@state.de.us
Senator Karen Peterson (9)
Office:  302-744-4163
karen.peterson@state.de.us
Senator Bethany Hall-Long (10)
Office: 302-744-4138
bethany.hall-long@state.de.us
Senator Anthony DeLuca (11)
Office: 302-744-4165
anthony.deluca@state.de.us
Senator Dori Connor (12)
Office:  302-744-4164
dorinda.connor@state.de.us
Senator David McBride (13)
Office: 302-744-4167
david.mcbride@state.de.us
Senator Bruce Ennis (14)
Office:  302-744-4310
bruce.ennis@state.de.us
Senator Nancy Cook (15)
Office: 302-744-4237
no email provided
Senator Colin Bonini (16)
Office: 302-744-4169
senator-colin@prodigy.net
Senator Brian Bushweller (17)
Office:  302-744-4162
brian.bushweller@state.de.us
Senator Gary Simpson (18)
Office: 302-744-4134
gsimpson@udel.edu
Senator Thurman Adams (19)
Office:  302-744-4318
thurman.adams@state.de.us
Senator George Bunting (20)
Office: 302-744-4144
george.bunting@state.de.us
Senator Robert Venables (21)
Office: 302-744-4298
robert.venables@state.de.us

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It’s June, the time for weddings, and if certain elected officials in the General Assembly have their way, it will also be the time for paying more to take that walk to the altar.

Yes, when the bride throws her bouquet, our legislators want to catch some cash. Raising the fee for a marriage license is just one of some two-dozen proposals to make it more expensive for folks to live in Delaware. As if propelled by an irresistible tic, the General Assembly looks to raising taxes and fees first — instead of considering more creative solutions to solve the state’s budget problems.

Why can’t the General Assembly do what millions of Americans have done when faced with financial problems:  look around your home, find assets that you don’t need, and sell them?  In Indiana, Governor Mitch Daniels inventoried the state’s assets and generated nearly $9 million by selling excess state cars, planes, and real estate.

In case you think this wouldn’t work in Delaware, did you know that our state owns two marinas!  Since Delaware isn’t launching its own navy, there doesn’t seem to be a pressing need for state support for yachting.

I have no doubt that a comprehensive, transparent inventory (as was done in Indiana) would reveal other unneeded assets that do not support basic state functions.  Of course, this would involve more work than simply passing lots of tax and fee increases, which is probably why the General Assembly hasn’t embraced this idea.

With a June 30 deadline looming to pass tax and fee increases, the time is now to let your legislators know that shaking down Delawareans for more cash is not the answer to our state’s fiscal situation; a leaner government — without marinas — is.

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The casual way some in Dover, from the Governor to the House Majority Leader, say “we recognize these are bad choices,” or “everyone will share the burden,” or “there are negatives with any of these options” when discussing the myriad proposed tax increases is disturbing.

As quoted in today’s News Journal, Majority Leader Pete Schwartzkopf says, “Obviously it’s going to hurt….there’s probably going to be no one out there that isn’t touched.”

This is the problem. The Delaware General Assembly clearly does not understand the harmful impact of all of these tax increases. I’m not sure they realize that there is a bigger picture than balancing the budget (yes, I know it needs to be done, but at the expense of improving Delawareans).

Here are the increases per The News Journal,

  • An increase in the personal income tax. House Bill 264, one of eight revenue bills introduced Monday, would raise the tax from 5.55 percent to 5.95 percent on taxable income from $50,000 to $60,000, from 5.95 percent to 6.95 percent on income from $60,000 to $150,000, and from 5.95 percent to 7.45 percent on income exceeding $150,000. That would raise an estimated $37.6 million.
  • Reinstating the inheritance tax. The tax, abolished in 1999, would be calculated using the rate schedule for state tax credits under the federal law in 2001. That is expected to raise $5 million.
  • Raising the gross receipts tax, often called Delaware’s hidden sales tax. That would raise about $7 million.
  • Raising the public utilities tax on cable TV and other services, and subjecting satellite TV services to the tax. That would raise about $7.1 million.
  • Raising the corporate franchise tax, which would net the state an estimated $127.4 million.
  • Bills to raise the taxes on alcohol and cigarettes were defeated in the House last week, but they remain alive through Thursday, thanks to a parliamentary maneuver by the Democrats. The taxes would raise almost $21 million.”

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