Delaware’s business tax structure earns high ranking

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Delaware managed to end up just outside the top 10  in a ranking of the state’s business tax structure.

The report was issued last month by the Tax Foundation, a nonpartisan group. Since 2014, the state has ranked as high as 20th, but has maintained the 11th spot in the past couple of years.

Wyoming ranked No. 1 in the report, with neighboring New Jersey finishing at 50th. Maryland was in 43rd place. Pennsylvania placed 29th.

Delaware finished just outside the top 10, thanks to low property taxes, the lack of a sales tax and a low unemployment compensation tax rate.  

In 2014, Delaware had the lowest unemployment compensation rate among the 50 states and the District of Columbia. It now ranks third. The state recently raised the weekly unemployment compensation payment, which was one of the lowest in the nation. The tax is split between employer and employee.

Delaware continues to have a high individual income tax, ranking 41st among the 50 states.  

Critics note that the high individual income tax rate hurts middle-income taxpayers who pay lower rates in neighboring Pennsylvania or no income tax in Florida.

Efforts by progressives in the Delaware General Assembly to raise income tax rates for the wealthiest residents have not gained traction. 

The No. 50 ranking on corporate taxes comes despite Delaware making changes to its corporate tax system. The changes were believed to be tied to efforts to retain the headquarters operations of Chemours, a DuPont spinoff and later on two of three companies that arose out of the merger and spinoff of Dow and DuPont. 

The foundation’s index ranks states based on their tax structure, not their tax burden, a Tax Foundation release stated. States with complex tax codes that distort business decisions do poorly, while states with transparent, neutral, fair tax codes score well.

“While the amount of revenue a state raises gets a lot of attention, it doesn’t tell the whole story about a state’s tax system,” said lead-report author Jared Walczak, a senior policy analyst at the Tax Foundation. “The goal of the index is to start a conversation between taxpayers and legislators about how their tax system compares with other states, and provide a roadmap for improvement.”

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