Well, I certainly did not have “new hashtag related to the Chancery Courts” on my 2025 bingo card. But here we are.
I suppose it was only a matter of time before the commentators on social media – Twitter, now known as X, to be specific – would weigh in on what was going on with Tesla and X owner Elon Musk and the Chancery Courts. I would also add: “Dexit” is very clever.
All jokes aside, I find it remarkable how quickly the word has spread about Delaware’s Chancery Court – something I didn't know existed until I started reporting here in the First State. It certainly was not talked about in the general media as casually as it is today, especially since the fated ruling against Musk’s pay package. In the last year, Delaware and the legal world was set aflame on what’s been happening in our tiny state, fanned on by the debate on shareholder rights when
the legislature passed Senate Bill 313 last year and later when then Gov. John Carney signed it.
Since then, we’ve had a remarkable turn of events. The CEO of a firm that handles a bulk of the millions of business incorporations that come here made a public address to the new governor about how he needed their support to protect the corporate tax. The new governor started a very public campaign on various news outlets, both local and national, digital and television, about the need to work with companies for possible reforms.
As of Feb. 13, The governor has
not said directly to the Delaware Business Times what those reforms are, lest it dilute the discussions, but it seems apparent we will be seeing at least another bill in the General Assembly once the legislators come back from break.
I believe there is wisdom in listening to people who are smarter than you and that would be the legions of lawyers writing legal papers, speaking to law publications and giving public speeches. However, it cannot be ignored that we are in strange times where the loudest voices right now, Musk and his followers - on and off line - are clearly setting their sights on Delaware. Whether companies are going to follow his mission remains to be seen.
However, cutting through the legal question of which reforms may work in whose favor is the biggest thing left unsaid at this point. Gov. Meyer, who has now been on the job for three weeks as of writing this editorial, has no other path ahead but to protect the corporate tax.
Delaware is a small state - not just by size, but by its budget, too. The current proposal is $7 billion. In terms of land size, Rhode Island may be our closest comparison and its proposed budget is $14 billion. Pennsylvania has a proposed budget of $51 billion. Maryland, which was already bracing for massive cuts before the federal funding freeze, is proposed at $67.3 billion.
The corporate tax - the tax that companies pay for being incorporated in Delaware and thus enjoying our rich corporate laws, access to some of the sharpest legal minds as well as the chance for a quick but nuanced decision from the Delaware Chancery Court - is $2 billion.
It’s roughly one-third of Delaware’s entire budget.
I’ve been told by legislators, lawyers, executives and more how we cannot afford to lose that revenue. Imagine schools closing. Imagine dozens of roads with potholes never to be filled. What about our libraries and fire companies that receive support from the state?
Gov. Meyer has pledged bold change in Delaware’s schools and it does seem like it may be possible. Now that the property tax structure has been updated and Delaware homes will be fairly reassessed every five years, we will have proper revenue to pay for it. But in a state that relies mainly on personal income tax as well as the corporate tax, it seems like a tall order to fill when some reports indicate the price tag may be between $500 million and $1 billion.
To achieve that, even in a normal year, the new governor is going to have to make some bold decisions when it comes to Delaware’s next budget. And this is not a normal year.
To put it simply, it is imperative for Gov. Meyer to protect the corporate tax at all costs to ensure that Delaware’s children have a better shot of a great education here in our state.
Rodel CEO Paul Herdman reminded me of that at one of our events where he described education as a game changer. He told a crowd of people at our 90 Ideas in 90 Minutes event that his father went to MIT on the GI Bill – and that enabled him to have a good career that eventually helped pay for Herdman’s college education, as well as that of his three siblings’
To see that game changer here in Delaware – a vision many Delawareans believe in – is going to be a challenge.
I am not a lawyer. There is a lot of debate about what “protecting the corporate tax” means when it comes to shareholder rights as well as executive rights. There is most certainly a lot of noise coming from social media and the actual media right now. Only time will tell us how it will end.
But there is no question in my mind: we need to ensure that we have continued that $2 billion in revenue in our state budget or we will have to find it elsewhere. The cost will be too great and we will all have to pay if it simply disappears.
Editor's note: This editorial was written the week before Feb. 17 and is included in the Feb. 18 edition of the Delaware Business Times.
