Minimum Wage: It’s not ‘Now or Never’

A draft of a bill to raise the minimum wage to $15 an hour by 2026—which would amount to a 61.6% increase—has been drafted and circulated for co-sponsorship. In light of a potential federal $15 minimum wage looming ahead, let’s look at the impact this would have.

A minimum wage increase of only $1 an hour can cost small businesses tens of thousands of dollars in additional payroll costs each year. This bill would force businesses let employees go if and when the minimum wage rises in their state, and prevent them from hiring new workers and expanding their business.

More than 163,000 Delaware workers have filed for unemployment assistance in the wake of the pandemic, with no sign of things returning to normal anytime soon. The minimum wage increase at this time would only drive more unemployment as Delaware businesses would be forced to lay off workers.

Less workers means less money circulated in the economy, less tax revenue, and less overall growth. Increased unemployment also contributes to domestic violence, mental health issues, obesity, and more. This should not only be seen as an economic issue, but a health concern as well.

Feel good policy isn’t always good. In this case, it hurts the very people it claims to help: low-wage and low-skill workers, disabled workers, former inmates, and more. These workers rely on low-skill and low-wage jobs that will now go to more experienced and attractive candidates as businesses will be looking to get what they are paying for in an employee.

Anyone who has studied basic economics can explain the price floor mechanism that is minimum wage, and how it directly results in increased unemployment and inflation. Prices will rise and goods will become too expensive for most, and the new “livable wage” will no longer be livable. In 5 years, will we be confronted with another government mandated market shift that will warp buying power and job security?

It doesn’t stop there. Small business cannot afford the same minimum wage increase that major corporations like McDonald’s and Amazon have already enacted internally. As big companies shift multi-billion dollar revenues around to account for the higher wages, small businesses are left scrambling.

The Delaware restaurant industry has had a particularly tough time during the pandemic, and would be crushed by a mandate like a minimum wage increase for at least a few years. It took the First State six years to recover from the 2008 recession. Despite the numbers being far worse than twelve years ago, the new minimum wage would start in just one year. Our small businesses and low-skill and low-income workers would have no chance.

It is interesting that the same people who want to stop the growth of these mega corporations also support a measure that would directly benefit them and hurt their competition. Rather than address the causes of these high living costs, proponents of $15 minimum wage want businesses to bear the cost of the problem.

Make no mistake, the very people pushing for $15 understand the consequences this mandate presents. When signing California’s $15 minimum wage into law, California Governor Jerry Brown said that “Economically, minimum wages may not make sense. But morally, socially, and politically they make every sense.”

The unintended consequences of raising the minimum wage have already been seen in New York, San Francisco, and Illinois. In San Francisco and New York, the restaurant industry has been hit especially hard by the measure, with many businesses raising prices (and losing customers), cutting hours, reducing staff, and some even filing for bankruptcy. When New York City’s minimum wage was raised to $15 per hour, there was an overall decline in restaurant workers, despite total employment increasing by more than 163,000 workers.

Owners tried raising menu prices and adding an extra surcharge to customers’ bills, but restaurants were no longer profitable. Many industries will face the same problem and their businesses will reduce worker hours or the number of workers, scale-back production, turn to automation, or shut down. Businesses want to pay their workers more, but government-mandated increases in wages hurt employment and the overall economy.

Delaware may not have a choice in the matter if the federal mandate passes. However, if that does not happen and the bill comes forward for a vote this session, Delaware lawmakers can either look at the evidence and decide to help Delaware workers and businesses, or vote based on rhetoric and make matters worse. shouldn’t join just to feel good. Increasing the minimum wage in the midst of a pandemic that crippled the workforce and businesses alike is not in the best interest of anyone but their own re-election.

30% Tax Increase Means Trouble for Small Businesses

The 2021 Legislative Session is under way, and your legislators wasted no time bringing forth bills to hurt Delaware workers and businesses. One would have expected that, in light of the pandemic and the turmoil it caused for the economy and business climate, Delaware lawmakers would have avoided these types of bills. You’d be mistaken.

Despite the projected $500M surplus this year, House Bill 64 would establish new tax brackets of $125,000 at 7.1% $250,000 at 7.85% and above $500,000 at 8.6%.

Currently, all income above $60,000 is taxed at a rate of 6.6%. This tax increase will serve as yet another stream of revenue for an ever-increasing budget, despite a lack of need. The main purpose of the income tax is to raise revenues for the government, but with a major surplus and lack of results from previous funding increases, we question the motives behind the bill.

Additionally, Delaware already has unfavorable rankings when it comes to taxation. We have the 18^th highest income tax burden. Delaware has the 7^th worst taxpayer ROI and 7^th highest taxes per capita—even higher than neighboring New York and New Jersey. Yet, here comes another tax increase.

Increases in the income tax are connected to individuals having less discretionary income (spending money) and less of an incentive to work, since take-home pay will decrease. Delawareans have already faced layoff and business closures, yet lawmakers are set to tighten their purse strings for them.

Interestingly, the lack of incentive to work can actually reduce the revenue brought in from the tax.

Perhaps this is why seven US states don’t impose state income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. Not having to pay a state income tax is believed to help individuals of all income classes, who would are able to keep their hard-earned money and save for retirement, vacations, school tuition and more.

The impact doesn’t stop there.

This legislation goes beyond individuals. Many small business In Delaware are filed as S-corps and pass-through LLC’s, and therefore file business taxes under the individual income tax umbrella. This means HB 64 bill will not only “tax the rich,” but tax our small businesses that have already been struggling to keep employees and stay open throughout the pandemic.

Delaware was already ranked one of the top ten worst states to start a business, largely due to having one of the worst business environments in the nation and 7^th highest business costs. The impact of the pandemic has only worsened the situation in the First State.

Higher tax rates can increase the chance that businesses fail, which is already a major concern in the current economic climate. Our lawmakers should hold off on anything that makes this worse. Increased rates can also hurt entrepreneurship, forcing individuals to seek secure, good-paying jobs. Higher taxes on business means it is less likely people will move their businesses here, as well as some state businesses leaving or reducing capital expenditures and halting growth plans.

We ask that you contact your legislators via this form to speak out against a 30% increase in the income tax: https://www.votervoice.net/ABetterDE/campaigns/68445/respond

Will Delawareans be welcomed in the 2021 Legislative Session?

Delawareans take a lot of pride in our little state, and so do we at A Better Delaware. That is why we are working to improve the state for every Delawarean, and for our future. The 2021 Legislative Sessions begins on Tuesday, January 12, and we will continue to advocate for you and your businesses throughout Session.

Currently, our representatives and leaders are not working to truly improve Delaware, and Delawareans are tired of seeing their state suffer because of it. Now is the time to critically think about the decisions that have been made in Dover, who is making them, and why. The 2021 Legislative Session could be the one to solidify the poor national standings A Better Delaware frequently reports on. It may push us further down the path of mediocrity, or could be the one that makes a decisive change that puts the First State back on top.

One such issue is that Delaware state government tends to minimize or even diminish the role of the citizen in decision-making, to the detriment of its constituency. Without transparency and accountability to influence better decisions, our officials are free to pass legislation to their own benefit, instead of that of its people.

The transparency issue with Delaware state government has been clear each time a bill is held until the last minute, or rules are suspended to bring forward a bill that was not on the agenda. Information is frequently withheld from constituents and stakeholders.

Transparency and the resulting ability to hold elected officials accountable have long been major issues in Delaware government with implications that span policy, spending, and public faith in government, but access should be easier than ever with virtual meetings and digital communication.

Evidence shows that government secrecy can lead to a lack of accountability and abuse of power, and when a local government isn’t forthcoming, it weakens the trust between the officials and their constituents.

Weakened public trust in government can lead to citizens and businesses becoming more risk-averse and delaying investment, innovation and employment decisions that impact economic growth and development. Establishing and focusing on transparency is an investment in economic recovery the future of the state.

Delawareans were teased with the promise change one year ago, when Delaware General Assembly leaders Sen. McBride and Rep. Schwartzkopf announced a new rule which made June 10, 2020 the last day that House or Senate committees could consider bills that originate in their respective chambers. In May, Rep. Schwartzkopf doubled-down on the promise, by asserting the General Assembly would “concentrate on the money bills,” and that anything beyond would need to be refiled in the start of this upcoming legislative session.

Legislators quickly went back on their word when session resumed virtually.

The purpose of the rule was to encourage public involvement and prevent bills from being rushed through at the end of session.

“The public isn’t fully aware of what we’re doing,’ President Pro Tempore, Senator David McBride said. ‘It’s not that we’re trying to do it without their knowledge. It’s just that things come up.”

Why, in the digital age, won’t our legislators communicate to the public upcoming bills that impact the state’s residents and businesses? What is the reluctance for legislators to hold themselves accountable, or continue to keep the state in the dark?

Voters need to speak out against legislation that is detrimental to their families, communities, businesses, or finances, but must be aware of upcoming bills to do so. In order to do better, our lawmakers must act better. As we approach the 151^st General Assembly, it is important to advocate for change by advocating for transparency and accountability in our state government.

Stay up to date on important issues and how to take a stand during this Session by keeping up with our social media, emails, blog, and VoterVoice platform.

Happy New Year!

As the new year approaches, many of us are thinking of ways we can change for the better and making resolutions for 2021. We want to know: is Delaware government and leadership doing the same? If the past any indication, it is unlikely to expect any self-reflection with budgeting, policy, or many other items. Here at A Better Delaware, we decided to make a 2021 resolution list for them:

Improved Transparency and Accountability

Delaware state government tends to minimize or even diminish the role of the citizen in decision-making, to the detriment of its constituency. Without transparency and accountability to influence better decisions, our officials are free to pass legislation to their own benefit, instead of that of its people.

A better way: allow for maximum transparency by livestreaming the session, allow public access to session, file bills publicly with ample time for public and official review, and no longer pass important pieces of legislation overnight on the final day of session.

End Corporate Welfare

Delaware’s game of corporate welfare is “a hell of an expensive lesson picking winners and losers,” and Delawareans are clearly the losers. Bloom, Fisker, and Solenis are just a few examples of expensive failures when it comes to big money for companies on the Delaware taxpayer’s dime.

A better way: Delaware lawmakers and leadership should reconsider their past failings and learn from their mistakes when approaching economic development via corporate incentives. After all, the definition of insanity is doing the same thing over and over again and expecting a different result. Instead, we must attract businesses by having a better business climate with lower taxes and less regulation.

Be kinder to business

According to the 2021 State Business Tax Climate Index from the Tax Foundation, Delaware is ranked 50^th in the nation for corporate taxes. Unfortunately, Delaware is no longer the business haven it once was. Factor in the sub-par help offered to struggling small businesses statewide during COVID and proposed measures like minimum wage and other employer mandates set to come up in the 2021 Legislative Session, and one could assume the goal is to force our businesses out of business.  In 2021, lawmakers must do better.

A better way: now is not the time to add any additional burden to small and local businesses that are still trying to stay afloat or recover from the pandemic. Instead, we should find ways to support them and boost employment.

Sunset the Health Resource Board (Certificate-of-Need)

Delaware is one of 35 states with Certificate-of-Need (CON) laws, in the form of its Health Resource Board. Despite a federal recommendation of repeal in 1986, the First State has kept this entity that raises health care costs and limits access to care. Without this Board, Delawareans could save $270 on average, have more local health care services, and be healthier overall.

A better way: It’s time for the legislature to sunset the Health Resource Board/CON. Delaware’s health indicators are mostly troubling, and COVID-19 has highlighted many shortcomings and demand for health care, which have been held back by the CON laws for the past 30 years.

Reform Taxes and Spending

With a projected $500M surplus, there should be no tax increases after the upcoming property tax reassessment. Our state budget (General Fund, Grant in Aid, and Bond) should not establish new spending, especially due to this revenue mostly being one-time funding. The last $200M “surplus” was the exact amount of additional revenue brought in by new tax increases implemented in 2017, and is responsible for some of the new surplus as well.

A better way: replenish the Budget Smoothing Fund and increase the Rainy Day Fund to prepare for the next statewide hardship. Additionally, it is imperative to pay down the massive pension deficit Delaware has. We can use this reassessment and new revenue to reduce our real estate transfer tax, which is currently the highest in the nation.

This may be a relatively short list in comparison to the many issues we at A Better Delaware see in the First State, but we will continue to tackle every issue that falls under our platform in 2021. We hope you’ll join us.

Our resolution is simple: continue to do what we can to fight for Delaware taxpayers and businesses and make Delaware a better place to live, work, and start or own a business. Happy New Year! We look forward to advocating for and with you in 2021.