Legislation reducing the top Delaware personal income tax rate to 5% failed to get out of a House Committee.
Delaware has one of the nation’s higher income tax bites, with a top rate of 6.6% for taxpayers with incomes of $60,000 or more. Supporters of the current rate point to the lack of a sales tax and lower property taxes as offsetting the impact of income taxes.
House Bill 233 was sponsored by House Minority Leader Michael Ramone, R-Newark, and had no Democrats listed as co-sponsors.
Ramone’s bill would reduce the number of tax brackets from five to three, with the top bracket dropping from 6.6 percent to 5 percent.
According to a fiscal note accompanying the bill, the bill, if the cuts went into effect in 2025 tax revenue would be cut by $1.1 billion over three years.
Republicans have pointed to tax cuts as a way to jumpstart a Delaware economy that has not seen an increase in the gross domestic product – the value of goods and services.
In other states and on the national level, Republicans claim higher total income tax revenues will trigger increased economic activity that would add tax revenues.
Delaware has been seeing large surpluses lately due in part to Covid-19 relief funds. However, those funds cannot be used to reduce taxes.
According to a Associated Press Press story, Ramone said he would not move the bill forward if sufficient surplus funds were unavailable.
Democrats were unlikely to support the bill due to wealthier taxpayers seeing the largest cuts in dollar terms.
Under Ramone’s bill, a taxpayer making $50,000 would pay $380 less. An individual with a $400,000 income would see a nearly $7,400 reduction. (See above chart)
In the past, raising taxes for wealthier Delawareans was a priority for former State Rep. John Kowalko, D-Newark. However, his long-running effort to add higher tax brackets never gained broad support in the majority party.
