Delaware’s State Tax Competitiveness: On the Wrong Track
By: Jane Brady, Chair, A Better Delaware: A Road Map For Improvement.
Delaware’s taxes are hurting our competitiveness. Our corporate and individual income taxes are having a negative influence on the expansion of our workforce, the development of new businesses and the bedrock of our state’s revenue – corporate filings.
We are the seventh worst state in the nation in which to form a business and have the worst corporate tax rate in the country. We recently adopted a law that would put government supervision over non-profit and hospital budgets. Only one other state in the nation has tried that, with terrible results. We have adopted mandates that go against a majority of the citizenry’s preference and do not comport with current science. And, we have multiple layers of regulation that stifle business initiation and development. We are seeing the results of our policies.
From 2021 through 2023 we saw a drop of 10% in the filing of new business formations with our Department of State, Corporations Division. As a result of a high-profile dispute with our Chancery Court, a specialty business court, Elon Musk has advised businesses to leave Delaware and took steps to remove three of his own companies from Delaware.
Business regulations and a shift in social attitudes in the General Assembly and state administrative agencies has been noted by even the Wall Street Journal. A recent article in that publication drew an analogy to the trust industry, once thriving in New Jersey, and noted how that state lost its standing as the place to formulate trusts. Delaware ‘s reputation as the place to incorporate, which took great vision and decades to establish, is fading or at least at risk.
The Brookings Institute published an abstract on the impact of changes to the individual income tax rates in states, and how it affects long-term economic growth. They found out that the structure and financing of tax changes are critical in achieving that growth and that lower income tax rates encourage people to work, save and invest.
Our General Assembly is on the wrong track, leading Delaware down a path from which it may not recover. While the General Assembly should not, but can, be irresponsible, the Governor must take the big picture approach to our state’s future standing and solvency. We encouraged out incumbent Governor to do just that, without success. Let us hope the incoming Governor will give consideration to the long-term harm our current policies could have on our long-term prosperity and take the leadership role necessary to assure our workforce, small businesses and state services can meet the needs of our citizens.
Jane Brady serves as Chair of A Better Delaware. She previously served as Attorney General of Delaware and as a Judge of the Delaware Superior Court.