DOVER – In the final days of the 153rd General Assembly, Delaware lawmakers are considering four significant fee and tax hikes to help bolster the state’s finances amid uncertain times.
Gov. Matt Meyer advocated for several tax and fee increases when he unveiled his vision for the $7.6 billion budget for fiscal year 2026, hoping to support the state’s finances while the federal budget left many unknowns yet to be answered.
While the governor has no authority to raise taxes and various fees through executive order, several representatives have taken up his call, and at least two proposals have already passed the House: two packages to raise environmental and transportation fees.
"The proposed DelDOT and DNREC fee increases are necessary to ensure we are adequately funding state services and can afford to invest in much-needed improvements to Delaware roads, bridges and parks," Meyer spokeswoman Mila Myles said in a statement. "Many of the fees haven't been raised in decades despite their essential nature as critical funding streams. The Meyer Administration is committed to delivering high-quality services to all Delawareans, and these resources will help keep that possible."
Earlier this month, the Joint Finance Committee released a marked-up budget that does not rely on a personal income tax increase or drawing down the fund balance. The budget proposal also does not include a “federal contingency fund” that Meyer sought to create.
Income Tax Proposal
As of press time, the Joint Finance Committee has not considered personal income tax increases. Meyer pushed for a tax increase so that the richest in the state would pay “their fair share” in his budget proposal that he unveiled in March.
Rep. Sean Lynn (D-East Dover) has a bill filed that would slightly cut taxes for those filers that earn less than $60,000. Those who earn more than that amount would see a slight increase; it would also create three new income brackets, with the top rate at 6.95%. Currently, the top income tax rate is 6.6% for those filers who earn more than $60,000.
On Tuesday, Lynn filed a
second substitute for the bill which would instead create a new bracket for filers between $60,000 and $150,000, which would be taxed at 6.6% Instead, there would be three new tax brackets created for those filers between $150,000 and $500,000. Those filers with $500,000 would be taxed 6.95%.
While there has been no fiscal analysis from the Department of Finance on the bill, Meyer’s proposal would have generated $13 million in the first fiscal year. Advocates, including Lynn, have said this bill was an effort to tax equity, or the idea of fair distribution of tax burdens among people.
Since Delaware does not impose a statewide property tax or a sales tax, the state relies on personal income tax for the large majority of revenue for the General Fund. Personal income tax accounts for roughly 35% of the state’s General Fund and has been growing for several years. But state officials who sit on the economic advisory panel have reported seeing signs that it may slow in the years to come.
In a statement to the Delaware Business Times, JFC Chair Rep. Kim Williams said that Democratic leadership in both the House and the Senate have publicly said there would be no personal income tax increases or new tax brackets created before the end of the fiscal year.
House Substitute 2 for House Bill 13 is set to be heard by the House Revenue & Finance Committee on Wednesday at 1 p.m.
DNREC Fees
The House passed a package of fee increases for the Delaware Department of Natural Resources and Environmental Control (DNREC) after agency officials argued that it’s necessary in order to retain and attract staff.
The fee package creates nine new air permit fees while also raising 21 air permit fees which businesses and developers typically pay. The proposal also changed 23 fees for hazardous waste facilities above ground, storage tanks, recycling and composting. The water division alone saw most of the fee adjustments with 36 new fees and 57 increases.
Some fees, such as renewal and application costs, are as low as $50 to $100. The highest is a $24,000 permit for air emissions.
All told, the fee package would generate $5.3 million, or $1.4 million less than what Meyer and DNREC originally sought.
House Bill 175 was passed out of the Senate Environment, Energy & Transportation Committee on Tuesday morning.
DelDOT Fees
A second fee package, this time from the Department of Transportation, also passed the House. The proposal contains the most significant fee increases this session.
With the outlook on gas tax falling $16.3 million below what the state projected, DelDOT is looking to impose new fees on electric vehicles in Delaware to help bridge the gap. This annual fee, ranging between $80 and $900 due to the vehicle’s weight and whether it is a plug-in, is projected to bring in an additional $2.9 million.
DelDOT also proposed raising DMV fees for learner permits, name changes, commercial licenses and more. This bundle of fees, which would be collected on an “as needed” basis, would generate $943,000.
The department also sought to raise car registration fees to $5.25 per $100 price per pound. This would bring in an additional $35 million.
The entire fee package outlined in House Bill 164 would generate $38 million. The bill was passed out of the Senate Environment, Energy & Transportation Committee on Tuesday morning.
A toll increase for all three toll roads was also a topic of discussion this session, as well as a possible rollout of tiered toll fees for U.S. Route 1 with lower fees for Delaware drivers.
DelDOT is also rolling out a tiered toll increase on South Route 1, a departure from the $1 on weekdays and $3 on weekends. Delaware E-ZPass holders are seeing it rise to $1.50 on weekdays to $4 on weekends. Those who use cash and out-of-state E-Zpass holders would pay $2.50 on weekdays and $6 on weekends.
The toll increase will generate $68.6 million, according to DelDOT representatives.
Both the DMV fees and toll increases, as well as gas tax, would ultimately benefit the Transportation Trust Fund which is kept separate from the General Fund. DelDOT is authorized to allocate money from that fund.
Two of the state’s top construction associations, the Associated Builders & Contractors of Delaware and the Delaware Contractors Association, support the DelDOT fee packages. The state agency often contracts many road improvement and highway construction projects to contractors across the 14,400 miles that cross the state.
Tobacco Tax
Meyer and House Speaker Melissa Minor-Brown have agreed on raising the tobacco tax in Delaware, though Minor-Brown’s proposal imposes a much higher tax.
House Bill 215 would raise tobacco tax from $2.10 to $3.60, marking its territory as the highest amongst neighboring states Pennsylvania and New Jersey. This bill would also open the door to possible taxes on other nicotine products, like pouches and “vapor products.” It would also raise the tax on sales of those vapor products, including e-cigarettes or vape pens, from 5 cents to 25 cents per fluid milliliter.
Meyer had pushed for a 50-cent increase, compared to the $1.50 increase in the bill.
Minor-Brown has said in prepared statements that this tax would help discourage people from smoking as e-cigarette usage continues to rise.
“Over 1,400 people in Delaware die each year due to tobacco use,” she said. “As a nurse, I know that these alternatives are not harmless and that there are real risks and costs associated with their use.”
In the last six years, the Delaware Department of Finance reports that the tobacco tax declined from fiscal year 2019 when it reached its peak at $122 million in receipts collected. That may be partly due to the state raising the age to buy tobacco products from 18 to 21 in 2019.
In fiscal year 2024, Delaware collected $94 million in receipts on tobacco taxes. There is no fiscal note on HB 216 that would show how much revenue the increased tobacco tax would bring the state.
HB 216 has been assigned to the House Administration Committee.
Editor's note: This story has been updated to include the recent development on HB 13 as well as a comment from Gov. Matt Meyer's office.
