Home Analysis Republican legislators hope tax cut bills will gain traction

Republican legislators hope tax cut bills will gain traction

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Republican legislators hope tax cut bills will gain traction
Property taxation
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General Assembly Republicans vow to move forward with tax cut legislation, citing the state’s growing surplus, now forecast at more than $800 million.

The bills introduced last year have remained in committee.

“It is an embarrassment that state government did not enact one meaningful tax cut last year,” said State Rep. Rich Collins, R-Millsboro, the author of one bill. “After the bills are paid, and appropriate reserves are set aside, I believe government has a duty to return money to the people from which it was taken. That was an obligation the legislature failed to honor last year.”.

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Democrats have countered with the argument that much of the surplus is due to Covid-19 relief measures that will go away. Tax cuts would lead to later tax increases during non-pandemic economic downturns, they argue.

A few Democratic legislators have proposed two additional tax brackets for those making earning in the low to mid six-figures, citing the growing income between the rich and poor. Those efforts have gone nowhere.

Federal relief money cannot be used for tax cuts. However, the state has seen gains in income tax revenues that could be used for that purpose.

House Bill 191, sponsored by Collins, would make a 10% across-the-board cut to the state’s personal income tax rates; reduce the corporate income tax by nearly 30%, and cut the gross receipts tax by 50%.  According to the bill’s fiscal impact statement, the proposal would allow taxpayers to collectively retain more than $282 million in the upcoming fiscal year and more than $321 million in fiscal 2024.

“This is an economic development bill,” Rep. Collins said. “In recent years, Delaware has had one of the worst economic growth rates in the nation. I believe allowing people and businesses to keep more of their own money will jumpstart investment, increase employment, and raise starting wages.

Economic growth estimates vary, with one report from U.S. News indicating that the state ranks in the mid-tier among the 50 states in economic growth. The third quarter report from the U.S. Bureau of Economic Research had the state ranked second among the 50 states in GDP growth.

State Rep. Lyndon Yearick, R-Camden, Wyoming, sponsored two bills.. House Bill 172, seeks to temporarily eliminate the state’s portion of the realty transfer tax for certain first-time home buyers.

The bill would apply to people with a gross income of less than $45,000 for single buyers or less than $75,000 in combined income for joint purchasers. To qualify, the purchase price of the home would need to be $250,000 or less. The bill will be amended to “sunset” (expire) on December 31, 2024. Ten lawmakers – nine Republicans and one Democrat – have thus far agreed to sponsor the bill.

Rep. Yearick’s second bill, House Bill 158, would establish the Delaware Resident Low Income Tax Credit. This act seeks to create a $500 tax credit for low income Delawareans. In the case of spouses filing a joint return, the tax credit would be $1,000. Individuals earning between $18,000 and $30,000 annually would qualify, as would spouses filing jointly with household incomes of between $36,000 and $60,000. Additionally, a $110 personal tax credit currently available to certain low- income Delawareans would be increased to $500.

The bill would result in about $77 million going to some Delawareans each year, according to the sponsor.

When the state faced a budget deficit in 2017, lawmakers enacted laws afecting seniors and homebuyers. State Rep. Mike Ramone (R-Pike Creek South) has introduced bills to reverse those moves.

House Bill 108 would restore the senior real property tax credit to a maximum of $500. Four years ago, the credit was cut to $400. A fiscal note completed last year indicates the bill would return more than $4.2 million annually to qualifying Delaware seniors. The measure has bipartisan support and has been pending action by the House Administration Committee for nearly a year, according to GOP legislators.

Ramone’s second proposal, House Bill 71, would decrease the realty transfer tax in Delaware by 25%. In 2017, the tax was effectively raised from 3% of the purchase price of a property to 4%. Local governments are responsible for three-eighths of this total, with the state accounting for the remainder. This bill would reset the state’s take to its pre-August 1, 2017 level, restoring the effective combined realty transfer tax to 3%.

When fully implemented in fiscal 2024, HB 71 would allow homebuyers to collectively keep an estimated $83 million.

“These bills are two initiatives that I have been relentlessly fighting for over the past few years,” Rep. Ramone said. “Given the state’s extraordinary revenue forecasts, there should be no reason to delay implementation of either proposal.”

Republicans say the first four bills have been improperly held in committee without a hearing for much longer than the 12 legislative days allowed under House Rules.

Pospects for the bills, minus bipartisan support, are dim. Democrats control both houses and the governor’s office.

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