DOVER — The top Delaware Democratic lawmakers agree that there will be some form of personal tax increase soon, although some disagree on its timing.
House Speaker Melissa Minor-Brown (D-New Castle) told Delaware’s business leaders on Wednesday morning that while she believes there are tax inequities, there needs to be more conversation on the topic with only four weeks to go in the legislative session.
“None of us in the General Assembly are personal income tax experts, and I think that when we do come up with a path forward, there needs to be experts at the table,” Minor-Brown said during a question-and-answer segment of the Delaware State Chamber of Commerce’s (DSCC) End-of-Session policy conference.
The House speaker added that the collection of experts may mean a task force, but the bill needs to be “done right.”
“Looking at future revenue loss, looking at inflation, the conversation needs to be had,” Minor-Brown said. “Will it happen this year? I don’t know. But do we need to start the conversation this year? We absolutely do. It has to be a comprehensive approach and it’s going to take time to get it right.”
Right now, Delaware’s top rate on personal income tax is 6.6% for households who earn more than $60,000. In the past, the top rate reached as high as 18% for those who earned more than $100,000 per year which was in effect in 1971. However, the top rate has remained below 7% for at least 20 years now.
House Substitute 1 for House Bill 13 would create three new tax brackets and set the top rate at 6.95% for households that earn more than $500,000. HS1 for HB 13 is set to have its first committee hearing on Thursday afternoon.
While Gov. Matt Meyer has said he supports raising the personal income tax, the Delaware State Chamber and various other business groups are strongly opposed to it. On Wednesday, the DSCC and the Delaware Business Roundtable wrote Minor-Brown a letter on their unified opposition to the personal income tax increase.
The letter, which was co-signed by every local chamber of commerce as well as the Committee of 100, the Kent Sussex Leadership Alliance and others, argues that with the greater economic uncertainties at play, now was not the time to raise taxes.
The coalition also said that it may cause business owners and employees to consider moving to a state with a lower income tax like Maryland and Pennsylvania, potentially exacerbating the issue of keeping a young workforce.
“Our geography works against us, because people can move across the line. There’s other issues at play, like school choice, that people think about. People are not going to move just because of the income tax. But we’re in a fight, and we want the talent to be here,” DSCC President Mike Quaranta said.
But Minor-Brown and Senate Pro Tempore David Sokola (D-Newark) were adamant that there must be a change on personal income tax in some form as a Delawarean earning $60,000 currently pays the same tax as one who is earning $500,000. Sokola also pointed out that when he was first elected in 1990, the top rate was 7.9% and it started at $40,000.
“It’s something that will be a difficult decision and I can’t guarantee there’s the votes to do it. But it might be the right thing to do. If it is, delaying it is not the right thing,” Sokola said.
To answer the question of whether the personal tax increase would damage Delaware’s competitiveness, Minor-Brown said there were key differences between population and tax structure across the mid-Atlantic region that made her feel comfortable with an adjustment.
“There’s room for us to make some changes without looking like we’re not a place for people to come and raise a family or retire. I don’t think we’re going to outdo those other states, but it’s something to consider,” she said.
“I think if we take our time, not too much time, but if we take a moment and really try to get this right, then we can find a path forward,” the house speaker added.
Since HS 1 for HB 13 is a revenue-generating bill, it must be heard and voted on in the House first.
