Gov. Jack Markell stopped short of ending earlier tax increases, but did propose limited cuts.In his budget address, Markell said the state will continue to invest in education and child services, including more state troopers at schools. No pay increase for state employees was proposed
“The tax proposals are aimed at stabilizing our revenue situation this fiscal year while being mindful of the need to consider challenges we face beyond the upcoming fiscal year,” said Tom Cook, State Secretary of Finance. “If we let taxes completely sunset, we will likely face a formidable fiscal problem in FY15.”
The proposals, outlined in Markell’s budget address include:
Personal Income Tax – Already reduced in 2012, the Governor’s proposal reduces the top personal income tax rate again. In 2009, the top personal income tax marginal rate (on income above $60,000) was increased from 5.95% to 6.95%. Effective January 2012, that rate was reduced to 6.75%. The governor proposes dropping that rate to 6.6%.(Effective January 1, 2014)
The proposed top rate of 6.6% is still among the most competitive in the region:
– New Jersey = 8.97%
-Maryland (Including counties) = 8.625%
– Washington, DC = 8.5%
Gross Receipts Tax – In 2009, the gross receipts tax increased 8 percent across all business categories. Effective January 2012, rates were reduced by 3%, and the monthly exclusion was increased from $80,000/month to $100,000/month, removing 330 businesses from the tax rolls. The governor proposes cutting the tax on manufacturers by 30 percent and dropping the gross receipts tax for all other businesses by another 1%, while maintaining the more generous $100,000 exclusion. (Effective January 1, 2014)
The governor’s gross receipts tax package supports two of Delaware’s most critical economic drivers – small businesses and manufacturing. Compared to the original sunset proposal, small businesses fare better under the Governor’s package:
For example, businesses in the service sector with annual receipts under $7.6 million pay less under the Governor’s proposal; and
Businesses with annual receipts under $1.2 million generally pay no tax.
Corporate Franchise Tax – In 2009, the corporate franchise top tax rate increased from $165,000 to $180,000. The Governor proposes keeping the current tax rate in place.
Estate Tax – The Governor proposes lifting the sunset. Under the Governor’s proposal, farms in the Aglands Preservation program will still be excluded from the tax. In 2011, the estate tax exemption increased from $3.5 million to $5.12 million.
The Fiscal Year 2014 Recommended Operating Budget totals $3,712.0 million. The proposed Fiscal Year 2014 Recommended Bond and Capital Improvements Act totals $423.5 million and includes $239.3 million in State agency capital projects and $184.2 million in Transportation projects. The Governor also set aside $43.0 million for Grants-in-Aid.
