Newark State Rep. John Kowalko has again introduced an income tax increase for those making more than $125,000 a year.
The Newark Democrat has introduced House Bill 64, with a broader base of support than in past years.
“This bill is intended to ensure a more fair and equitable progressive tax structure that is sustainable and not overly burdensome to any category of earners,” said Kowalko, D-Newark South. “It has been carefully calculated to apply a minimal amount of tax increases while ensuring a sustainable revenue source in future economic downturns.”
Delaware has a 6.6 percent top income tax rate that affects a large percentage of taxpayers, since it kicks in when the adjusted annual income is only $60,000. Kowalko’s plan does not use added revenue from the top rates to lower tax bills for those making $60,000 or less.
By contrast, neighboring Pennsylvania has a top income tax rate of slightly more than three percent, although the state’s sales and property taxes can reduce that advantage.
Critics also claim the tax would simply move more wealthy Delaware taxpayers to Florida, a state with no income tax and have little impact on total tax revenue.
Kowalko and others have noted that during the past year’s pandemic, income by the highest earners has actually increased. Corporate executives and other wealthier taxpayers have expressed concern that the gap between the wealthiest taxpayers and those with lower incomes has continued to increase and is not a healthy trend.
“An income tax structure that has graduated rates for lower incomes but a flat tax for all top-earners is, to be blunt, only half-built. Rightfully, we tax the first $60,000 earned at lower rates, which increase step-by-step,” said Sen. Marie Pinkney, the newly elected Senate sponsor of HB 64. “But the final step – 6.6% for all income $60,000 and above – should be the middle of the ladder, not the end.
Under HB 64, those earning more than $125,000, would see a 7.10 percent, a 7.85 precent for for taxable income in excess of $125,000 and up to $250,000, and 8.6 percent for taxable income in excess of $500,000. A taxpayer who earns $250,000 in a year would pay an additional $625 in income tax under the proposed legislation, according to a release from Kowalko.
The bill has the backing of Senate President Pro Tempore David Sokola, a lead sponsor of the bill. The Senate has added to its Democratic majority after two Republican legislators lost their bids for reelection.
HB 64 has eight additional co-sponsors and has been assigned to the House Revenue & Finance Committee.