Legislation that makes the standard deduction for personal income taxes availble to more taxpayers has been introduced. The bill also increases the the Earned Income Tax Credit for lower income residents..
House Bill 89, sponsored by State Rep. Paul Baumbach and Senate Pro Tem Dave Sokola, was introduced in the House. House Bill 89 increases the standard deduction for personal income taxes by 75 percent in Tax Year 2024, and increases the refundable Earned Income Tax Credit to 7.5 percent of the federal credit for Tax Year 2023. The legislation also adjusts income thresholds for personal income tax to adjust for these increases. Gov. John Carney announced this tax relief package his Fiscal Year 2024 recommended budget earlier this year.
The bill has one Republican co-sponsor. Republicans generally favor lowering the corporate tax rate and reducing the state’s top income tax bracket of 6.6%, which is among the highest in the nation and makes its way down to incomes of $60,000 a year. At the same time, the state has no sales tax and low property taxes. Business do pay a gross receipts tax on sales.
A fiscal note on the effect of the bill on tax revenues has not been completed.
“Increasing the standard deduction as well as the Earned Income Tax Credit will help thousands of working families in Delaware lift take-home pay — and help pay for child care, education, medical bills, and other expenses that we know can grow each year,” said Carney. “This legislation will help working Delaware families, and provide a real benefit for the middle class. We are pleased to partner with Representative Baumbach and Senator Sokola on this legislation, and we hope that all members of the General Assembly will join us in making this a priority.”
Under House Bill 89, the Standard Deduction would increase by 75 percent to $5,700 for an individual ($11,400 for a couple), effective Tax Year 2024. Additionally, the 7.5 percent increase to the earned income credit would enable nearly 20,000 tax filers to have net liability reduced to $0, or receive refunds.
“I was very excited when Governor Carney announced these two tax provisions in his 2024 budget. Taken together, these changes will put more money in the pockets of working Delawareans at a time they most need this assistance,” said Baumbach, D-Newark, the lead sponsor of House Bill 89. “The standard deduction increase is designed to catch up to years of inflation and will provide welcome relief to many middle-income Delaware families.It will also simplify the tax reporting for many families. I spent several years leading efforts to introduce a refundable Earned Income Tax Credit program to Delaware. As such, I am especially delighted that the governor is leading efforts to expand this, directing critical support to Delaware’s working families most in need of support. For these reasons, I am very excited to be joining Senator Sokola and many other caucus leaders in prime-sponsoring this legislation to implement the Governor’s recommended tax changes.”
The Delaware Department of Finance expects House Bill 89 to simplify tax preparation for 370,000 tax filers. The Department estimates that about 50,000 tax filers could switch to the standard deduction. More than 80 percent of residents that would benefit from this tax relief package have a Delaware Adjusted Gross Income below $75,000.
The federal Earned Income Tax Credit is a tax credit that reduces the amount of federal income tax a person owes, and is refundable if the tax-filer’s credit is larger than what they owe in taxes. The credit is described as the nation’s most effective anti-poverty program for working families. The federal EITC was introduced in 1975 and was designed to offset federal income taxes and social security payroll taxes while rewarding work.
