Kowalko back with bill calling for bigger income tax bite for higher income residents

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Good afternoon,

You have to give credit to state Rep. John Kowalko for one thing – he does not give up.

Kowalko with some support from a more liberal General Assembly is again proposing adding higher income tax brackets.

The two added brackets would kick in at $125,000 and $250,000. (Click. here for a link to the latest version of the bill that Kowalko brings up every year).

The Newark representative believes added bracketsare a partial answer to Delaware’s structural budget deficit that comes when income tax revenues drop during economic downturns.

One such downturn will come sooner rather than later after a long period of expansion.

The Delaware State Newsnoted that Kowalko’s measure already has opposition from his own party, as well as the prospect of unanimous condemnation from Republicans.

The positive impact on revenues would be partially offset added incentives for the wealthy of a certain age moving their state of residence to Florida. Lists from Forbes and other entities rarely if ever have a Delawarean on the list.

A case could be made lowering the tax rate for top earners and other incentives as a way to bring in added tax revenue from suburban Philadephia residents who might prefer a home in Delaware.

But the biggest problem with Kowalko’s proposal is its failure to deal with the biggest inequity in the tax code.

Thanks in part to the state’s East Coast location and relatively high cost of living, Delaware’s top tax rate is a burden for many families.

It only takes a $60,000 a year income to qualify for the 6.6 percent top tax rate. As things now stand, the state income tax paid by a Pennsylvania family earning $250,000 is about $7,500 less than the figure for Delaware. (Source SmartAsset).

Tax reform with some bracket relief for working families might be a more worthy alternative.

In the past, efforts to lower the top rate were a priority. Butas the government began scratching for revenues, efforts to use surplus funds to lower tax rates have fallen by the wayside.

It is doubtful that Kowalko’s proposal will become law. It would be worthwhile to see a spirited debate on taxes. That could happen since the bill did get out of committee.

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