Two Republican legislators say a bill they have introduced will reduce the effects of income tax “bracket creep”
House Bill 278, sponsored by State Rep. Rich Collins, R-Millsboro and State Sen. Dave Lawson, R-Marydel, would require the state’s personal income tax brackets to be annually adjusted for inflation.
Rep. Collins said Delaware’s income tax rates hurt low- and moderate-income Delawareans the most.
Bracket creep has not been much of an issue until the recent bout with inflation, since wages in Delaware often remained stagnant and cost of living wage increases were modest.
Delaware has one of the nation’s higher income tax rates. Last year, Republican legislators proposed lowering income tax rates, while progressive Democrats wanted to add tax brackets for those making the highest incomes.
At the same time, many Republicans have opposed raising the state’s minimum wage to $15 an hour by 2025.
“The value of cost-of-living raises earned by low- and moderate-income Delawareans is being eroded by our state’s rigid tax system,” Collins said. “Wages growing in recognition of inflation are being taxed at higher rates as those earnings are pushed over static tax bracket thresholds. It amounts to state theft by inefficiency.”
Lawson agreed that inflationary ‘tax bracket creep’ hits working Delawareans the hardest. “Our tax rates should keep pace with inflation to maintain balance and equity with wages,” he said. “Working families facing higher expenses need every dollar to which they’re entitled, especially at a time when the cost of essentials is rapidly rising.”
Under the measure, Delaware’s income tax rates would be adjusted annually by an amount equal to the change in the Consumer Price Index prepared by the Bureau of Labor Statistics for urban consumers. If enacted, the legislation would take effect at the start of 2023.
The bill is pending action in the House Revenue & Finance Committee.
