Business leaders are lining up in opposition to a proposed ordinance in Wilmington that would require service industry employers to provide two-weeks notice of work schedules and compensate employees when changes occur.
The measure, sponsored by Council Member Shané Darby, D-District 2, aims to provide more schedule stability for hourly workers at retail, hospitality and foodservice establishments with 250 employees or more and franchises with less than 250 employees.
The proposed ordinance would allow workers to decline shifts not included in a posted work schedule or shifts that do not provide at least 9 hours of rest after a previous shift.
If asked to work shifts that don’t allow for 9 hours of rest, employers would be required to pay workers an extra $40, in addition to their regular compensation.
“The reason why I’m doing this is because I care about working-class people, especially the most vulnerable groups,” Darby said. “I think that Wilmington could be the catalyst to what it looks like to protect workers, protect workers’ rights, and to make sure that people are able to work and live.”
Council Member James Spadola, R-At Large, called the proposal “a solution in search of a problem.”
He said businesses unable to keep up with the regulatory burdens imposed by the city can easily open shop elsewhere.
The proposed rules could also hurt workers, opponents say.
“This potential ordinance puts part-time workers under attack,” said Carrie Leishman, president and CEO of the Delaware Restaurant Association. “This is a counterproductive and dangerous ordinance at a time where Delaware restaurants still have 4,500 open positions.”
Under the bill, for each employer-initiated change to a posted work schedule, employers must pay an employee “predictability pay” at the following rates, in addition to the employee’s regular pay for hours actually worked by the employee:
1 hour of predictability pay when the covered employer adds time to a work shift or changes the date or time or location of a work shift, with no loss of hours.
1/2 hour of predictability pay for any scheduled hours the employee does not work for the following reasons:
Hours are subtracted from a regular or on-call shift, or
A regular or on-call shift is canceled.
The bill also requires employers to offer shifts to existing employees and pay any subsequent penalties before offering the shift to contractors or temporary employees.
“We’re trying to tackle the big dogs first and then kind of look at the conversation around what it looks like to have fair legislation for small and local businesses,” Darby told Delaware LIVE News.
Darby said she’s not concerned that the ordinance could hurt businesses struggling to make ends meet in the wake of the pandemic.
“If we were talking about a small local business then I might say ‘okay, I can look at that,’ but not for big businesses like the Marriott or the DoubleTree,” she said. “I don’t think the hotel industry has been hit that hard due to the pandemic. I’ll have to look at the data and research but people have been traveling – I don’t think they have been impacted that much.”
Data shared during a city budget hearing Monday shows the city’s lodging tax revenues are still below pre-pandemic levels.
The Restaurant Association’s Leishman called the proposal “politically motivated.”
She said it’s “fueled by the campaign donations of labor unions as a way to boost up dwindling union participation and pit small businesses against employees” by reducing part-time and flexible job opportunities.
Asked who she thinks might oppose the legislation, Darby laughed then responded: “Hospitality, retail and foodservice establishments that employ 250 employees or more.”
She emphasized that the law would apply to franchised businesses that employ less than 250 employees in city limits.
“You can be a franchise in Wilmington and only hire 20 or 30 people, but if you’re a part of a bigger network like McDonald’s, then you are subject to this legislation.”
Bob Older, president of the Delaware Small Business Chamber, said including franchisees like hotels and fast food restaurants in the bill is “irresponsible and uneducated.”
“You’re telling me that a Dunkin’ Donuts with 10 employees must abide by this regulation but a bakery with 20 employees that’s next door to them doesn’t,” Older asked. “Just because you’re a franchise doesn’t mean that you’re anything more than a small business.”
He said despite small businesses already being short-staffed and under pressure from external factors like inflation and supply chain disruptions, Delaware’s lawmakers think now is the right time to impose even more costly burdens on businesses.
“With this ordinance, you’ll be penalizing businesses twice,” he continued. “If somebody doesn’t show up to work, they call somebody in and change the schedule – they’re gonna have to compensate that person even more. That’s not to mention the worker who called out.”
Older predicts that because of legislation like the fair workweek ordinance, companies are going to continue resorting to automation, something he said is “unfortunate.”
Darby sees it differently. The bill, she said, isn’t meant to be a burden on businesses, but rather an extra layer of protection for workers who are vulnerable and often taken advantage of by their wealthy employers.
Leishman believes the measure would result in “a mountain of red tape” and cost jobs for those who rely on their paychecks the most.
Restaurants, she argued, offer flexible scheduling opportunities which workers embrace, specifically relating to first-time jobs and second-chance opportunities in downtown Wilmington where the 6.2% unemployment rate far exceeds the state’s unemployment rate of 4.5%.
Leishman believes the measure discourages employers from offering extra shifts on short notice.
“Restaurants are an industry of choice and employees can be free to pick up shifts that so often meet the needs of their financial circumstances,” she said.
Many people who work in hospitality are putting themselves through school or have full-time jobs and careers elsewhere, but need extra money for personal reasons, she said.
Leishman pointed to San Francisco, the first city to embrace “fair workweek” laws. The result, she said, has been predictable.
A survey conducted by Lloyd Corder of Corcom Inc. found that 20% of affected businesses cut back on the number of part-time hires, and a similar number were scheduling fewer employees per shift.
More than one-third of affected employers began offering less schedule flexibility as a consequence of “fair workweek” laws, the survey found.
“There is nothing ‘fair’ in ‘fair scheduling’ for the employer and employee,” Leishman concluded.
Darby said employees will be responsible for reporting violations of the law to a labor commission that the bill would create. In the future, she hopes the city will allocate funds to hire an investigator to look into complaints.
Although it creates a labor commission, the bill wouldn’t cost any money, she said.
Spadola cast doubt on that claim.
“I would disagree that there’s no fiscal impact because every hour of work our city employees dedicate to this will cost the city money,” Spadola said.
“Throughout the countless civic association meetings I’ve attended in every area of the city, not one person has ever brought this up as a problem, nor has anybody reached out to me about it as a problem, nor has anybody ever spoken about it during public comment in a council meeting, as far as I know.”
In addition to hurting businesses and workers, Spadola feels the bill will hurt the city’s bottom line.
“The city needs funding to pay for city employees, for the services that the city provides, for firefighters, police, everything,” he said. “One of the ways the city raises those funds is through wage taxes, and so at a time when we need more businesses to come in here and boost up our wage tax, we can’t be passing unfriendly ordinances that will make them go elsewhere.”
Spadola plans to vote against the bill and he’s hoping others do too.
“I wish I could say it doesn’t stand a chance,” he said. “I don’t think it will pass, but if it did, I would actively encourage the mayor to veto it because I don’t think the city could stand for this at this time.”
Bob Chadwick, president of the New Castle County Chamber of Commerce, said his group opposes the proposed ordinance because employment law is already regulated at the state and federal level.
In a state the size of Delaware, two levels of government oversight are sufficient, Chadwick said.
“The legislation would add unnecessary burdens for employers, remove their ability to be flexible in running their businesses, increase costs by requiring them to pay employees for canceled shifts, and unreasonably interfere in their relationships with their employees, many of whom went into the retail, hospitality or food service industries for the scheduling flexibility,” he continued.
“The ordinance sends the wrong message to existing and prospective Wilmington employers. Employers in the City of Wilmington are already subject to a wage tax and a head tax, and legislation such as this which would increase costs, impose burdensome regulation, and limit flexibility will make it act as a disincentive to open or maintain businesses within the city.”
Efforts to reach the Delaware Food Industry Council, the group that represents grocery stores and pharmacies, were unsuccessful.
Spokespeople for Mayor Mike Purzycki and the Delaware State Chamber of Commerce said they weren’t prepared to comment Monday.
Darby said she hasn’t reached out to any of the state’s chambers of commerce to get a sense for how the bill would impact businesses in the city.
“That might be a good entity to reach out to just to see if they were supportive or not,” she said. “It wouldn’t change the legislation, but that would be good to just know.”
When professions utilize occupational licensing to impose unnecessarily burdensome requirements and fees to deny entry to a profession, occupational choice and economic opportunity are drastically limited in the Volunteer State.
Sadly, these costs fall the hardest on the most vulnerable populations.
The evidence shows occupational licensing makes it harder to obtain certain jobs, especially for minority and low-income residents. Education, experience, and financial costs tend to be a greater burden for underserved populations because of a lack of access to quality formal education and financial resources. And, by restricting occupational choice, licensing can serve to deny economic opportunity to minority and low-income residents.
Historically, licensing laws were pursued in some cases with the harmful intent of denying economic opportunity to African Americans. This was certainly true for some licensed professions in Tennessee, such as barbers.
An archival search of newspapers could not locate a single instance of consumer harm from unlicensed barbers before the first major attempts to license the profession in Nashville in 1903. In fact, the Tennessean asked at that time, “Is there sound reason for the enactment of a barbers’ licensing law?”
The purpose, however, was clear to African American barbers who strongly opposed the licensing laws. They saw that the effect of licensing would put them out of business. Barber exams in Chattanooga by the 1940s, for instance, accomplished this through an exam that required prospects to needlessly memorize barber terms in Latin giving a distinct advantage to those with access to financial resources and quality education.
This trend continues today as licensing laws still mau create discriminatory outcomes. For example, a recent study in the Journal of Midwifery & Women’s Health found racism is still “common in midwifery education, professional organizations, and clinical practices.”
Occupational licensing also can harm minority and low-income residents by pricing services beyond their ability to pay. Licensing in a wide range of industries, including barbers, electricians and plumbers, decreases the availability and quality of these services for low-income residents. The increased cost of service forces these residents to choose between going without the service, recklessly performing the service themselves, or to hire someone under the table.
Policymakers should eliminate any occupational licensing requirements with no credible and documented threat to consumer safety. Even when plausible harm exists, policymakers should take into consideration whether other mechanisms, such as certification, private litigation, insurance or warranties, could assure consumers of quality without empowering industries to restrict occupational mobility and economic opportunity for the least advantaged.
Tennessee policymakers can best serve our most vulnerable populations by thoroughly reviewing and reforming Tennessee’s licensure laws to reduce the imposed burden on all residents.
March’s jobs report showed a slowdown in growth. The economy gained 431,000 nonfarm payroll jobs, compared to 750,000 the previous month. In March, there were notable gains in sectors including leisure and hospitality, professional and business services, retail trade, and manufacturing.
Now, the U.S. unemployment rate sits at 3.6%, which is still slightly higher than it was before the pandemic but is far lower than the nearly historic high of 14.7% in April 2020. This overall drop can be attributed largely to a combination of vaccinations and states removing restrictions. It will take more time for us to reduce the unemployment rate to pre-pandemic levels than it did for the virus to reverse over a decade of job growth, though.
In order to identify the states whose unemployment rates are bouncing back most, WalletHub compared the 50 states and the District of Columbia based on six key metrics that compare unemployment rate statistics from the latest month for which data is available (March 2022) to key dates in 2019, 2020 and 2021.
Main Findings
State
Rank
Nebraska
1
Indiana
2
Montana
3
Utah
4
Kansas
5
Minnesota
6
New Hampshire
7
Oklahoma
8
Arizona
9
Alabama
10
South Dakota
11
Idaho
12
Arkansas
13
Wisconsin
14
Virginia
15
Vermont
16
West Virginia
17
Tennessee
18
Rhode Island
19
Florida
20
Wyoming
21
Georgia
22
North Carolina
23
North Dakota
24
Mississippi
25
Louisiana
26
Missouri
27
Iowa
28
South Carolina
29
Oregon
30
Ohio
31
Colorado
32
Washington
33
Kentucky
34
Maine
35
New Jersey
36
Michigan
37
Nevada
38
Pennsylvania
39
Alaska
40
New York
41
Texas
42
Illinois
43
Connecticut
44
Delaware
45
California
46
Massachusetts
47
Maryland
48
New Mexico
49
Hawaii
50
District of Columbia
51
Overall Rank
State
Unemployment Rate (March 2022)
Change in Unemployment (March 2022 vs March 2019)
Change in Unemployment (March 2022 vs January 2020)
Change in Unemployment (March 2022 vs March 2020)
Change in Unemployment (March 2022 vs March 2021)
Not Seasonally Adjusted Continued Claims (March 2022 vs March 2019)
You may not be aware that Delaware has a tax on carbon dioxide emissions from power plants. In 2009 power companies were required to start buying allowances from the Regional Greenhouse Gas Initiative (RGGI) program to emit carbon dioxide. The allowance cost was added to electric bills but was hidden from customers.
So far, under the RGGI program, Delaware has received $187 million in revenue, and as much as $100 million may be sitting unspent. The state program intended to reduce emissions may actually be increasing emissions globally.
We recommend a legislatively mandated one-year RGGI “tax-free carbon holiday” that would include a thorough review of the program and how the tax revenue is allocated.
In 2016 Delaware generated 78% of its electric demand in-state, but in 2021 we were down to 36%. We may be close to zero in-state generation as early as 2024. That means lost jobs, lost state and local tax revenues, higher electric rates, and possibly lower power reliability.
Low use of power plants can double emissions (see graph below), and longer transmission lines add another 10% to emissions.
Our peer-reviewed study comparing RGGI states to non-RGGI states with otherwise similar energy policies shows that RGGI doesn’t work to reduce emissions.
We estimate RGGI added 357,000 tons of CO2 per year to global emissions in 2021. At first, the allowances only cost a few dollars per ton, and electricity wholesale prices were higher than today.
However, the latest auction price was $13.50 a ton, and that means Delaware natural gas power plants have to bid 15% higher into the regional grid than utilities in non-RGGI states to cover the tax, so they lose bids and don’t generate as much power.
Delaware’s lone emitting coal-powered plant in Millsboro must bid 34% higher prices as it emits over twice as much per unit of power as natural gas. NRG Energy has announced a plan to close the facility this year as it only operates about 15% of the time and can’t cover the overhead.
The multistate RGGI manager forecasts electric rates rising by 40% by 2030 as higher allowance prices influence wholesale power prices even in non-RGGI states and importing our power may increase costs by another 5% to cover the average line losses and congestion charges based on PJM data.
Legislation requires 65% of RGGI revenue to go to the Delaware Sustainable Energy Utility (DESEU), a private non-profit that provides grants for energy efficiency projects.
Their budget and audit reports show they spend only about $7 to $8 million a year on program grants and administrative costs. Their reports show only about 4,000 tons of annualized CO2 emissions savings or a cost of about $2,000/ton.
Emission savings claims are not backed by the audit that matters; before and after project electric and gas meter readings, so the claimed savings are doubtful.
RGGI revenue to the DESEU was $24 million in 2021 and should rise to $34 million in 2022. The DESEU has been accumulating unspent funds for over a decade and likely had $73 million by the end of 2021, and will be close to $100 million by the end of 2022, or about 13 years of expenses.
They have been giving loans to boost interest revenue and minimize their stash of cash. Still, there is no evidence that the projects they have financed couldn’t have been borrowed elsewhere.
Clearly, it is time to stop sending money automatically to the DESEU. They could still receive Grant-in-Aide grants from the state as many other private nonprofits do.
Delaware’s Department of Natural Resources & Environmental Control (DNREC) receives 35% of the RGGI revenue.
Delaware’s Low-Income Home Energy Assistant Program receives 5% to help pay utility bills. The DNREC’s low-income Weatherization Assistance Program(WAP) receives 10% or almost $4 million in 2021. DNREC can spend the balance of about $7 million in 2021, supporting energy efficiency and renewable energy programs.
A DNREC website lists WAP projects completed by date.
It appears the WAP program has essentially closed for the last two pandemic years. Past annual reports from the Energy Efficiency Advisory Council suggest DNREC may only be spending $2.5 million a year on WAP and about $3.5 million on other projects from the RGGI funds.
DNREC has not responded to a Freedom of Information Act request for the recent spending history of RGGI funds or the total amount of unspent RGGI funds they have accumulated. Extrapolating from past reports, DNREC may have $20 to $25 million in unspent RGGI funds and would not suffer from a RGGI “tax-free carbon holiday.”
The US Energy Information Administration just released survey results and found that 25 million American families (27%) reported forgoing basic necessities to pay energy bills sometime in 2020, while 7 million of those families reported doing so every month.
With inflation raging and energy costs hurting the poor and middle class, a RGGI “tax-free carbon holiday” makes sense. It makes even more sense to reconsider the entire RGGI program and its allocation of RGGI revenues. We note that New Hampshire returns RGGI revenue to electric customers, and Connecticut sends all RGGI revenue to its General Fund.
In calendar year 2022, state-local tax burdens are estimated at 11.2 percent of national product.
Taxpayers remit taxes to both their home state and to other states, and about 20 percent of state tax revenue comes from nonresidents. Our tax burdens analysis accounts for this tax exporting.
New Yorkers faced the highest burden, with 15.9 percent of net product in the state going to state and local taxes. Connecticut (15.4 percent) and Hawaii (14.9 percent) followed close behind.
On the other end of the spectrum, Alaska (4.6 percent), Wyoming (7.5 percent), and Tennessee (7.6 percent) had the lowest burdens.
Tax burdens rose across the country as pandemic-era economic changes caused taxable income, activities, and property values to rise faster than net national product. Tax burdens in 2020, 2021, and 2022 are all higher than in any other year since 1978.
State-local tax burdens are often very close to one another and slight changes in taxes or income can translate to seemingly dramatic shifts in rank. For example, Oklahoma (10th) and Ohio (24th) only differ in burden by just over one percentage point. However, while burdens are clustered in the center of the distribution, states at the top and bottom can have substantially different burden percentages.
Table 1. State-Local Tax Burdens by State, Calendar Year 2022
State
Effective Tax Rate
Rank
Alabama
9.8%
20
Alaska
4.6%
1
Arizona
9.5%
15
Arkansas
10.2%
26
California
13.5%
46
Colorado
9.7%
19
Connecticut
15.4%
49
Delaware
12.4%
42
District of Columbia
12.0%
(39)
Florida
9.1%
11
Georgia
8.9%
8
Hawaii
14.1%
48
Idaho
10.7%
29
Illinois
12.9%
44
Indiana
9.3%
14
Iowa
11.2%
34
Kansas
11.2%
33
Kentucky
9.6%
17
Louisiana
9.1%
12
Maine
12.4%
41
Maryland
11.3%
35
Massachusetts
11.5%
37
Michigan
8.6%
5
Minnesota
12.1%
39
Mississippi
9.8%
21
Missouri
9.3%
13
Montana
10.5%
27
Nebraska
11.5%
38
Nevada
9.6%
18
New Hampshire
9.6%
16
New Jersey
13.2%
45
New Mexico
10.2%
25
New York
15.9%
50
North Carolina
9.9%
23
North Dakota
8.8%
7
Ohio
10.0%
24
Oklahoma
9.0%
10
Oregon
10.8%
31
Pennsylvania
10.6%
28
Rhode Island
11.4%
36
South Carolina
8.9%
9
South Dakota
8.4%
4
Tennessee
7.6%
3
Texas
8.6%
6
Utah
12.1%
40
Vermont
13.6%
47
Virginia
12.5%
43
Washington
10.7%
30
West Virginia
9.8%
22
Wisconsin
10.9%
32
Wyoming
7.5%
2
What Are Tax Burdens?
In this study, we define a state’s tax burden as state and local taxes paid by a state’s residents divided by that state’s share of net national product. This study’s contribution to our understanding of true tax burdens is its focus on the fact that each of us not only pays state and local taxes to our own places of residence, but also to the governments of states and localities in which we do not live.
This tax shifting across state borders arises from several factors, including our movement across state lines during work and leisure time and the interconnectedness of the national economy. The largest driver of this phenomenon, however, is the reality that the ultimate incidence of a tax frequently falls on entities other than those that write the check to the government.
What is Tax Incidence?
The incidence of a tax is a measure of which entity pays the tax. But there are two very different types of tax incidence: legal incidence and economic incidence.
The legal incidence of taxes is borne by those with the legal obligation to remit tax payments to state and local governments. Legal incidence is established by law and tells us which individuals or companies must physically send tax payments to state and local treasuries.
The legal incidence of taxes is generally very different from the final economic burden. Because taxes influence the relative prices facing individuals, they lead to changes in individual behavior. These tax-induced changes in behavior cause some portion (or all) of the economic burden of taxes to be shifted from those bearing the legal incidence onto others in society. For example, the legal incidence of corporate income taxes typically falls on companies. But economists agree that some portion of these taxes is shifted forward to others, in the form of higher prices for consumers, lower wages for workers, reduced returns to shareholders, or some combination of the three.
Once these tax-induced changes in behavior throughout the economy are accounted for, the final distribution of the economic burden of taxes is called the economic incidence. This measure is also referred to as the tax burden faced by individuals in their roles as consumers, workers, and investors.
What is Tax Exporting?
Beyond the fact that tax burdens often ultimately borne by many people who do not directly remit them, taxes imposed by state and local governments are often borne—in both their legal and economic incidence—by nonresidents. When some share of the burden of a tax imposed in one state is borne by those who live elsewhere, this phenomenon is known as tax exporting.
Alaska provides good examples of tax exporting. Sixty percent of Alaska’s state and local tax collections came from residents of other states in 2022. The main driver is state taxes on oil extraction (severance taxes and taxes on oil production and pipeline property). The burden of Alaska’s oil taxes does not fall predominantly on Alaska residents. Ignoring this fact and comparing Alaska tax collections directly to Alaska income makes the tax burden of Alaska residents look much higher than it actually is.
This study assumes that much of the economic burden of severance taxes falls on oil industry investors rather than on Alaska taxpayers. Notably, this study does not assume that the burden substantially falls on consumers (including drivers who purchase motor fuel), since these prices are set by global energy markets. The same is true for states like North Dakota and Wyoming where, once this allocation is made, the aggregate tax burden falls from among the nation’s highest to the lowest.
Resource-rich states such as these are only some of the more extreme examples of tax exporting. Major tourist destinations like Florida and Nevada are able to tax tourists, who are most often nonresidents, in addition to exporting many tax costs to investors. Some states have large numbers of residents employed out of state who pay individual income taxes to the states in which they work. When a metropolitan area attracts workers from nearby states, a large portion of wage income in a state can be earned by border-crossing commuters. On the other hand, some states have reciprocity agreements in which they tax their own residents, regardless of where they work. This study accounts for these types of agreements.
Every state’s economic activity is different, as is every state’s tax code. As a result, each varies in its ability to export its tax burden. Economists have been studying this phenomenon since at least the 1960s when Charles McLure estimated that states were extracting between 15 and 35 percent of their tax revenue from nonresidents.[1]
Much of this interstate tax collecting occurs through no special effort by state and local legislators or tax collectors. Tourists spend as they travel and many of those transactions are taxed. People who own property out of state pay property taxes in those states. And the burden of business taxes is borne by the employees, shareholders, and customers of those businesses wherever they may live. In many states, however, lawmakers have made a conscious effort to levy taxes specifically on nonresidents. Common examples include tax increases on hotel rooms, rental cars, and restaurant meals, and local sales taxes in resort areas.
What Is the Difference between Tax Burdens and Tax Collections?
The distinction between tax burdens and tax collections is crucial to understanding tax shifting across state lines. Because tax collections represent a tally of tax payments made to state and local governments, they measure legal incidence only. In contrast, our tax burdens estimates allocate taxes to states that are economically affected by them. As a result, the estimates in this report attempt to measure the economic incidence of taxes, not the legal incidence.
Tax collections are useful for some purposes and cited frequently. However, dividing total taxes collected by governments in a state by the state’s total income is not an accurate measure of the tax burden on a state’s residents as a whole because it does not accurately reflect the taxes that are actually paid out of that state’s income.
The authoritative source for state and local tax collections data is the Census Bureau’s State and Local Government Finance division, which serves as the main input and starting point for our tax burdens model. Here are a few additional examples of the difference between tax collections (tallied by the Census Bureau) and our tax burdens estimates:
When Connecticut residents work in New York City and pay income tax to both New York State and the city, the Census Bureau will count those amounts as New York tax collections, but we count them as part of the tax burden of Connecticut’s residents.
When Illinois and Massachusetts residents own second homes in nearby Wisconsin or Maine, respectively, local governments in Wisconsin and Maine will tally those property tax collections, but we shift those payments back to the states of the taxpayers.
When people all over the country vacation at Disney World or in Las Vegas, tax collectors will tally the receipts from lodging, rental car, restaurant, and general sales taxes in Florida and Nevada, but we allocate these taxes partially to the vacation-goers themselves, partly to labor, and partially to holders of capital across the country.
In addition to allocating the taxes cited above, this study also allocates taxes on corporate income, commercial and residential property, tourism, and nonresident personal income away from the state of collection to the state of the taxpayers’ residences.
Which Taxes Are Included in the Tax Burdens Estimates?
We include all taxes reported by the Census Bureau’s State and Local Government Finance division, the most comprehensive resource on state and local tax collections data and our tax burden model’s starting point. These taxes are:
Property taxes;
General sales taxes;
Excise taxes on alcoholic beverages, amusements, insurance premiums, motor fuels, pari-mutuels, public utilities, tobacco products, and other miscellaneous transactions;
License taxes on alcoholic beverages, amusements, general corporations, hunting and fishing, motor vehicles, motor vehicle operators, public utilities, occupations and businesses not classified elsewhere, and other miscellaneous licenses;
Individual income taxes;
Corporate income taxes;
Estate, inheritance, and gift taxes;
Documentary and transfer taxes;
Severance taxes;
Special assessments for property improvements; and
Miscellaneous taxes not classified in one of the above categories.
Our time unit of measure is the calendar year. Fiscal year data from states have been adjusted to match the calendar year. The state and local tax burden estimates for calendar year 2022 presented in this paper are based on the most recent data available from the Census Bureau, the Bureau of Economic Analysis, and all other data sources employed, and grossed up to the present based on the latest economic data.
Limitations
Tax burden measures are not measures of the size of government in a state, nor are they technically measures of the complete burden of taxation faced by a given state’s residents (this study excludes compliance costs and economic efficiency losses). Furthermore, the tax burden estimates presented here do not take into account the return to that taxation in the form of government spending. These drawbacks, however, are not unique to our tax burden estimates.
It is also worth noting that these tax burden estimates are not those of individual taxpayers. Our tax burden estimates look at the aggregate amount of state and local taxes paid, not the taxes paid by an individual. We collect data on the total income earned in a state (by all residents collectively) and estimate the share of that total that goes toward state and local taxes.
Calendar Year 2022 Results: Tax Burden by State
State-local tax burdens of each of the 50 states’ residents as a share of income are clustered quite close to one another. This is logical considering state and local governments fund similar activities such as public education, transportation, prison systems, and health programs, often under the same federal mandates. Furthermore, tax competition between states can often make dramatic differences in the level of taxation between similar, nearby states unsustainable in the long run.
Table 2. State-Local Tax Burdens by State (with Detailed Breakdown), Calendar Year 2022
State
State-Local Effective Tax Rate
Rank
State-Local Tax Burden per Capita
Taxes Paid to Own State per Capita
Taxes Paid to Other States Per Capita
Alabama
9.80%
20
$4,585
$3,578
$1,007
Alaska
4.60%
1
$2,943
$1,527
$1,416
Arizona
9.50%
15
$5,156
$3,997
$1,159
Arkansas
10.20%
26
$5,031
$3,598
$1,433
California
13.50%
46
$10,167
$8,711
$1,457
Colorado
9.70%
19
$6,699
$5,010
$1,689
Connecticut
15.40%
49
$12,151
$9,883
$2,268
Delaware
12.40%
42
$7,170
$5,580
$1,591
District of Columbia
12.00%
-39
$11,654
$9,060
$2,594
Florida
9.10%
11
$5,406
$3,533
$1,873
Georgia
8.90%
8
$4,862
$3,711
$1,151
Hawaii
14.10%
48
$8,410
$7,082
$1,328
Idaho
10.70%
29
$5,402
$4,140
$1,262
Illinois
12.90%
44
$8,390
$6,866
$1,523
Indiana
9.30%
14
$5,030
$3,965
$1,064
Iowa
11.20%
34
$6,086
$4,812
$1,274
Kansas
11.20%
33
$6,353
$4,971
$1,382
Kentucky
9.60%
17
$4,669
$3,679
$990
Louisiana
9.10%
12
$4,762
$3,705
$1,056
Maine
12.40%
41
$6,906
$5,712
$1,194
Maryland
11.30%
35
$7,680
$5,940
$1,740
Massachusetts
11.50%
37
$9,405
$7,565
$1,840
Michigan
8.60%
5
$4,720
$3,595
$1,125
Minnesota
12.10%
39
$7,763
$6,316
$1,448
Mississippi
9.80%
21
$4,220
$3,422
$798
Missouri
9.30%
13
$4,953
$3,666
$1,287
Montana
10.50%
27
$5,795
$4,200
$1,595
Nebraska
11.50%
38
$6,720
$5,327
$1,393
Nevada
9.60%
18
$5,554
$3,932
$1,622
New Hampshire
9.60%
16
$6,593
$4,784
$1,809
New Jersey
13.20%
45
$9,648
$7,696
$1,952
New Mexico
10.20%
25
$4,835
$3,859
$977
New York
15.90%
50
$12,083
$10,380
$1,702
North Carolina
9.90%
23
$5,299
$4,156
$1,143
North Dakota
8.80%
7
$5,403
$3,800
$1,603
Ohio
10.00%
24
$5,530
$4,380
$1,149
Oklahoma
9.00%
10
$4,527
$3,380
$1,148
Oregon
10.80%
31
$6,572
$5,191
$1,381
Pennsylvania
10.60%
28
$6,723
$5,354
$1,369
Rhode Island
11.40%
36
$6,948
$5,273
$1,675
South Carolina
8.90%
9
$4,596
$3,365
$1,231
South Dakota
8.40%
4
$5,196
$3,526
$1,670
Tennessee
7.60%
3
$4,036
$3,082
$954
Texas
8.60%
6
$4,994
$3,849
$1,146
Utah
12.10%
40
$6,750
$5,346
$1,404
Vermont
13.60%
47
$7,958
$6,532
$1,426
Virginia
12.50%
43
$7,979
$6,367
$1,612
Washington
10.70%
30
$7,803
$6,069
$1,734
West Virginia
9.80%
22
$4,479
$3,444
$1,034
Wisconsin
10.90%
32
$6,231
$4,911
$1,320
Wyoming
7.50%
2
$4,691
$2,647
$2,045
Since we present tax burdens as a share of income as a relative ranking of the 50 states, slight changes in taxes or income can translate into seemingly dramatic shifts in rank. For example, Oklahoma (10th) and Ohio (24th) only differ in burden by just over one percentage point. Tax revenue growth during the pandemic, however, has not only increased overall tax burdens but also expanded variance among states. In our last pre-pandemic analysis, the 20 middle-ranked states differed by less than a percentage point on effective rate, but in 2022, the difference between New Hampshire (16th) and Maryland (35th) is 1.8 percentage points. While burdens are clustered in the center of the distribution, states at the top and bottom can have substantially different burden percentages: the state with the highest burden, New York, has a burden percentage of 15.9 percent, while the state with the lowest burden, Alaska, has a burden percentage of 4.6 percent.
Nationwide, 20 percent of all state and local taxes are collected from nonresidents. As a result, the residents of all states pay surprisingly high shares of their total tax burdens to out-of-state governments. Table 2 lists the per capita dollar amounts of total tax burden and income that are divided to compute each state’s burden, as well as the breakdown of in-state and out-of-state payments for calendar year 2022.
The residents of three states stand above the rest, experiencing the highest state-local tax burdens in the country: New York (15.9 percent of state income), Connecticut (15.4 percent), and Hawaii (14.1 percent). By contrast, the median state-local tax burden is 10.2 percent, and the national average is 11.6 percent. Three states are at or below 8 percent: Alaska (4.6 percent), Wyoming (7.5 percent), and Tennessee (7.6 percent)
New York, Hawaii, and Connecticut have occupied the top three spots on the list since 2017, with California, Maryland, Minnesota, New Jersey, and Vermont typically vying for the next five spots—though not always in the same order. This may be partially attributed to high expenditure levels, which must be sustained by high levels of revenue. Furthermore, in the case of states like Connecticut and New Jersey, relatively high tax payments to out-of-state governments add to already high in-state payments, both due to direct interactions with neighboring states like New York and because these are high-income states whose residents experience high levels of capital gains. High levels of capital gains will result in residents paying an increased share of other states’ business taxes.[2] Finally, a substantial portion of Hawaii’s tax burden is generated by the tourism industry and substantially exported to the rest of the country.
The states with the highest state-local tax burdens in calendar year 2022 were:
1. New York (15.9 percent)
2. Connecticut (15.4 percent)
3. Hawaii (14.1 percent)
4. Vermont (13.6 percent)
5. California (13.5 percent)
6. New Jersey (13.2 percent)
7. Illinois (12.9 percent)
8. Virginia (12.5 percent)
9. Delaware (12.4 percent)
10. Maine (12.4 percent)
The states with the lowest state-local tax burdens in calendar year 2022 were:
Generally, there are three reasons why a state’s ranking could change from year to year. First, there could have been a change in total collections by the state, either due to policy changes or economic fluctuations. Second, there may have been a change in the level of state product due to changing economic conditions. And third, other states to which residents pay state and local taxes could have seen changes in tax collections (again due to changing policy or economic conditions).
Our current data are for tax year 2022, based on prior-year complete Census tax revenue data, quarterly tax data through the end of calendar year 2021, up-to-date national accounts data and economic forecasts, and adjustments for recently adopted tax policies. This represents the first time that Burdens has been presented as a current year estimate rather than an analysis of prior-year data.
The effects of the COVID-19 pandemic and of the economic changes of the past two years can be seen in our data. Net national product rose 13.6 percent in nominal terms between 2019 and 2022, while state and local tax collections rose 19.9 percent. High-income, high-tax states saw collections soar as the stock market first recovered and then boomed after an early 2020 dip, and across the country, behavioral changes induced by the pandemic increased the share of taxable activity, while federal aid to individuals and businesses further boosted taxable income and activity. A hot housing market, moreover, has begun to show up in property tax assessments. The result is tax collections increasing faster than income growth, yielding higher overall burdens in 2020-2022 despite more states cutting tax rates than raising them in recent years. For each of these years, effective tax rates stood at 11.2 percent of net national product, higher than all years in our series except the first two for which data are available, 1977 (11.7 percent) and 1978 (11.6 percent).
Table 3 lists each state’s burden as a share of income, including rankings, for the three most recent calendar years available.
Table 3. State-Local Tax Burdens as a Percentage of Net Product, 2020-2022
Burden Percentages and Rankings
2019
2020
2021
2022
State
Rate
Rank
Rate
Rank
Rate
Rank
Rate
Rank
U.S. Average
10.6%
11.2%
11.2%
11.2%
Alabama
9.1%
12
10.0%
18
10.0%
20
9.8%
20
Alaska
5.6%
1
5.0%
1
4.1%
1
4.6%
1
Arizona
9.4%
18
9.8%
15
9.6%
16
9.5%
15
Arkansas
10.3%
28
10.9%
29
10.7%
26
10.2%
26
California
12.2%
46
12.9%
47
13.3%
46
13.5%
46
Colorado
9.6%
22
10.1%
19
10.0%
21
9.7%
19
Connecticut
12.5%
48
13.7%
48
14.7%
49
15.4%
49
Delaware
11.3%
39
12.2%
40
12.2%
40
12.4%
42
District of Columbia
11.0%
(37)
11.6%
(34)
11.7%
(36)
12.0%
(39)
Florida
8.9%
8
9.2%
5
9.1%
9
9.1%
11
Georgia
9.0%
9
9.4%
9
9.1%
10
8.9%
8
Hawaii
13.2%
49
13.7%
49
13.9%
48
14.1%
48
Idaho
9.5%
19
10.2%
23
10.8%
29
10.7%
29
Illinois
11.2%
38
12.5%
42
12.9%
44
12.9%
44
Indiana
9.0%
10
9.3%
6
9.3%
12
9.3%
14
Iowa
11.0%
37
11.8%
35
11.5%
35
11.2%
34
Kansas
10.2%
26
10.8%
27
11.1%
31
11.2%
33
Kentucky
9.8%
23
10.2%
21
10.0%
19
9.6%
17
Louisiana
8.9%
7
9.3%
8
9.1%
11
9.1%
12
Maine
11.6%
41
12.1%
39
12.4%
42
12.4%
41
Maryland
11.9%
43
12.6%
43
11.9%
38
11.3%
35
Massachusetts
10.8%
34
11.4%
30
11.4%
34
11.5%
37
Michigan
9.6%
20
9.6%
12
9.0%
7
8.6%
5
Minnesota
12.3%
47
12.7%
44
12.4%
43
12.1%
39
Mississippi
9.4%
16
9.8%
14
9.8%
17
9.8%
21
Missouri
9.0%
11
9.5%
11
9.4%
14
9.3%
13
Montana
10.2%
27
10.8%
26
10.7%
27
10.5%
27
Nebraska
10.8%
33
11.7%
34
11.7%
37
11.5%
38
Nevada
9.4%
17
10.2%
22
9.9%
18
9.6%
18
New Hampshire
9.2%
15
9.4%
10
9.5%
15
9.6%
16
New Jersey
11.9%
44
12.8%
45
13.0%
45
13.2%
45
New Mexico
10.5%
30
11.6%
32
10.5%
25
10.2%
25
New York
14.2%
50
14.9%
50
15.2%
50
15.9%
50
North Carolina
9.6%
21
10.1%
20
10.1%
23
9.9%
23
North Dakota
9.2%
14
9.9%
16
7.9%
3
8.8%
7
Ohio
10.1%
25
10.6%
24
10.4%
24
10.0%
24
Oklahoma
8.8%
6
9.6%
13
9.0%
8
9.0%
10
Oregon
11.7%
42
11.9%
37
11.1%
32
10.8%
31
Pennsylvania
10.4%
29
10.8%
28
10.7%
28
10.6%
28
Rhode Island
11.4%
40
12.0%
38
11.7%
36
11.4%
36
South Carolina
9.2%
13
9.9%
17
9.4%
13
8.9%
9
South Dakota
8.6%
5
8.8%
4
8.7%
6
8.4%
4
Tennessee
6.9%
2
7.6%
2
7.7%
2
7.6%
3
Texas
8.4%
4
8.7%
3
8.4%
5
8.6%
6
Utah
10.9%
36
11.8%
36
11.9%
39
12.1%
40
Vermont
12.0%
45
12.8%
46
13.4%
47
13.6%
47
Virginia
10.9%
35
12.4%
41
12.4%
41
12.5%
43
Washington
10.6%
31
11.4%
31
11.0%
30
10.7%
30
West Virginia
10.0%
24
10.7%
25
10.1%
22
9.8%
22
Wisconsin
10.8%
32
11.6%
33
11.3%
33
10.9%
32
Wyoming
7.9%
3
9.3%
7
8.3%
4
7.5%
2
Many of the least-burdened states forgo a major tax. For example, Alaska (1st), Wyoming (2nd), Tennessee (3rd), South Dakota (4th), Texas (6th), and Florida (11th) all do without taxes on individual income. Similarly, Wyoming and South Dakota do without a major business tax, and Alaska has no state-level sales tax (though it does allow local governments to levy sales taxes). Notably, opting to not levy a personal income tax causes a state to rely more on other forms of taxation that might be more exportable.
Not every state with a significant amount of nonresident income uses it to lighten the tax load of its own residents. Maine and Vermont have the largest shares of vacation homes in the country,[3] and they collect a sizeable fraction of their property tax revenue on those properties, mostly from residents of Connecticut, Massachusetts, and other New England states. Despite this, Maine and Vermont still rank 41st and 47th, respectively, in this study.
Despite the importance of nonresident collections and the increasing efforts to boost them, the driving force behind a state’s long-term rise or fall in the tax burden rankings is usually internal and most often a result of deliberate policy choices regarding tax and spending levels or changes in state income levels. This study is not an endorsement of policies that attempt to export tax burdens. From the perspectives of the economy and political efficiency, states can create myriad problems when they purposefully shift tax burdens to residents of other jurisdictions. This study only attempts to quantify the amount of shifting that occurs and understand how it affects the distribution of state and local tax burdens across states.
Historical Trends
Nationally, average state-local tax burdens as a share of income have fallen slightly from 11.7 percent in 1977 to 11.2 percent in 2022, as the pandemic-era economy has yielded an increase in tax burdens to the highest level in decades. Chart 2 shows the movement of U.S. average state-local tax burdens since 1977.
Some states’ residents are paying the same share of their income to taxes now as they were three decades ago, but in other states, tax burdens have changed substantially over time. The tax burden in every state fluctuates as years pass for a variety of reasons, including changes in tax law, state economies, and population. Further, changes outside of a state can impact tax burdens as well. See Table 4 for historical trends in burdens by state (selected years).
Table 4. State-Local Tax Burdens as a Percentage of State Income by State, Selected Years
State
1977
1980
1990
2000
2010
2015
2019
2020
2021
2022
U.S. Average
11.7%
10.4%
10.7%
9.7%
10.6%
10.3%
10.6%
11.2%
11.2%
11.2%
Alabama
10.1%
9.3%
9.5%
8.8%
9.2%
8.7%
9.1%
10.0%
10.0%
9.8%
Alaska
12.7%
8.9%
6.1%
5.1%
7.2%
5.8%
5.6%
5.0%
4.1%
4.6%
Arizona
11.7%
10.2%
10.7%
8.9%
9.2%
8.9%
9.4%
9.8%
9.6%
9.5%
Arkansas
9.4%
9.2%
9.3%
9.4%
10.8%
10.4%
10.3%
10.9%
10.7%
10.2%
California
13.3%
11.4%
11.3%
10.7%
12.0%
11.4%
12.2%
12.9%
13.3%
13.5%
Colorado
11.6%
10.0%
10.4%
8.9%
9.5%
9.4%
9.6%
10.1%
10.0%
9.7%
Connecticut
12.1%
10.5%
11.1%
11.3%
12.9%
11.9%
12.5%
13.7%
14.7%
15.4%
Delaware
10.9%
10.3%
9.2%
8.6%
9.7%
9.7%
11.3%
12.2%
12.2%
12.4%
District of Columbia
13.4%
13.8%
12.9%
11.5%
9.8%
10.1%
11.0%
11.6%
11.7%
12.0%
Florida
10.2%
8.7%
9.2%
8.6%
10.0%
9.0%
8.9%
9.2%
9.1%
9.1%
Georgia
10.5%
9.9%
10.5%
9.3%
9.5%
9.0%
9.0%
9.4%
9.1%
8.9%
Hawaii
11.6%
11.0%
10.6%
9.9%
10.8%
12.1%
13.2%
13.7%
13.9%
14.1%
Idaho
11.7%
10.5%
11.0%
10.2%
10.0%
9.7%
9.5%
10.2%
10.8%
10.7%
Illinois
11.5%
10.6%
10.6%
9.4%
10.9%
11.0%
11.2%
12.5%
12.9%
12.9%
Indiana
9.4%
8.3%
9.5%
8.4%
9.9%
8.9%
9.0%
9.3%
9.3%
9.3%
Iowa
11.5%
10.7%
11.0%
9.5%
10.0%
10.3%
11.0%
11.8%
11.5%
11.2%
Kansas
10.6%
9.6%
10.3%
9.6%
10.1%
9.1%
10.2%
10.8%
11.1%
11.2%
Kentucky
10.7%
9.8%
10.3%
10.0%
9.7%
9.7%
9.8%
10.2%
10.0%
9.6%
Louisiana
8.6%
8.0%
8.5%
8.4%
8.2%
8.4%
8.9%
9.3%
9.1%
9.1%
Maine
11.4%
10.9%
11.5%
10.9%
10.9%
11.2%
11.6%
12.1%
12.4%
12.4%
Maryland
12.6%
11.6%
11.6%
10.6%
10.9%
11.5%
11.9%
12.6%
11.9%
11.3%
Massachusetts
13.4%
12.1%
11.4%
10.0%
10.9%
10.7%
10.8%
11.4%
11.4%
11.5%
Michigan
11.7%
10.6%
10.6%
9.6%
10.2%
9.8%
9.6%
9.6%
9.0%
8.6%
Minnesota
12.3%
10.9%
11.5%
10.3%
11.3%
11.9%
12.3%
12.7%
12.4%
12.1%
Mississippi
10.5%
9.4%
9.5%
9.1%
9.3%
9.4%
9.4%
9.8%
9.8%
9.8%
Missouri
10.3%
9.4%
9.9%
9.3%
9.5%
9.0%
9.0%
9.5%
9.4%
9.3%
Montana
10.8%
9.6%
10.0%
8.9%
9.5%
10.1%
10.2%
10.8%
10.7%
10.5%
Nebraska
12.1%
10.8%
10.3%
9.6%
10.2%
10.1%
10.8%
11.7%
11.7%
11.5%
Nevada
9.4%
7.8%
8.2%
7.2%
8.8%
9.4%
9.4%
10.2%
9.9%
9.6%
New Hampshire
9.9%
8.5%
8.6%
7.7%
8.8%
9.8%
9.2%
9.4%
9.5%
9.6%
New Jersey
13.9%
12.1%
11.9%
11.0%
13.0%
11.5%
11.9%
12.8%
13.0%
13.2%
New Mexico
10.1%
9.3%
10.8%
9.9%
9.1%
9.3%
10.5%
11.6%
10.5%
10.2%
New York
14.7%
13.2%
13.1%
11.7%
13.2%
14.5%
14.2%
14.9%
15.2%
15.9%
North Carolina
10.9%
10.2%
10.5%
9.7%
10.5%
9.8%
9.6%
10.1%
10.1%
9.9%
North Dakota
13.0%
10.8%
10.4%
9.4%
9.5%
9.7%
9.2%
9.9%
7.9%
8.8%
Ohio
9.9%
9.2%
10.5%
10.2%
10.2%
10.1%
10.1%
10.6%
10.4%
10.0%
Oklahoma
9.7%
8.7%
10.0%
9.7%
9.3%
8.2%
8.8%
9.6%
9.0%
9.0%
Oregon
12.4%
11.2%
11.8%
10.1%
10.9%
11.2%
11.7%
11.9%
11.1%
10.8%
Pennsylvania
11.5%
10.7%
10.6%
9.9%
10.6%
10.1%
10.4%
10.8%
10.7%
10.6%
Rhode Island
12.7%
11.6%
11.4%
11.1%
11.4%
11.2%
11.4%
12.0%
11.7%
11.4%
South Carolina
10.3%
9.7%
10.2%
9.1%
8.8%
9.0%
9.2%
9.9%
9.4%
8.9%
South Dakota
10.1%
8.9%
8.3%
7.2%
7.9%
8.7%
8.6%
8.8%
8.7%
8.4%
Tennessee
9.1%
8.0%
8.1%
7.0%
7.9%
7.2%
6.9%
7.6%
7.7%
7.6%
Texas
8.9%
7.7%
8.7%
7.5%
8.4%
8.2%
8.4%
8.7%
8.4%
8.6%
Utah
11.7%
11.1%
11.2%
10.4%
10.0%
9.6%
10.9%
11.8%
11.9%
12.1%
Vermont
13.0%
10.8%
11.1%
10.1%
10.8%
11.7%
12.0%
12.8%
13.4%
13.6%
Virginia
11.4%
10.4%
10.5%
9.8%
10.0%
9.7%
10.9%
12.4%
12.4%
12.5%
Washington
10.8%
9.6%
10.1%
8.6%
9.9%
9.9%
10.6%
11.4%
11.0%
10.7%
West Virginia
10.8%
10.2%
10.0%
9.7%
10.5%
9.8%
10.0%
10.7%
10.1%
9.8%
Wisconsin
14.1%
12.2%
12.3%
11.5%
11.7%
10.5%
10.8%
11.6%
11.3%
10.9%
Wyoming
9.0%
7.9%
6.9%
6.7%
8.3%
8.8%
7.9%
9.3%
8.3%
7.5%
States Where the Tax Burden Has Changed Dramatically Over Time
Among states with declining tax burdens, Alaska is the extreme example. Before the Trans-Alaska Pipeline system was finished in 1977, taxpayers in Alaska paid 11.7 percent of their share of net national product in state and local taxes. By 1980, with oil tax revenue pouring in, Alaska repealed its personal income tax and started sending out checks to residents instead. The tax burden plummeted, and now Alaskans are the least taxed with a burden of only 4.6 percent of income.
Similarly, North Dakota’s burden has fallen from 13.0 percent in 1977 to 8.8 percent of net state product in 2022.
Although the majority of states have seen a decrease in tax burdens over time, 16 have experienced increases since 1977, many of these likely to be temporary upticks due to the pandemic. Connecticut taxpayers have seen the largest increase, of 3.3 percentage points, followed by Hawaii at 2.5 percent.
Conclusion
When measuring the burden imposed on a given state’s residents by all state and local taxes, one cannot look exclusively to collections figures for the governments located within state borders. A significant amount of tax shifting takes place across state lines, and this shifting is not uniform. Furthermore, this shifting should not be ignored when attempting to understand the burden faced by taxpayers within a state.
A bill introduced into the state House of Representatives would cut by 25% the taxes paid because of the sale of a home.
Introduced by Rep. Bill Bush, D-Dover, House Bill 358 would make law of something Rep. Mike Ramone, R-Pike Creek South, has been preaching for years: reducing the cost of Delaware’s real estate transfer tax after it was increased during financially difficult years.
The realty transfer tax is levied on the purchase price of the home and is usually split between the buyer and seller, unless otherwise negotiated.
“Right now, in most cases, Delaware has a functional realty transfer tax of 4%,” said Rep. Kevin Hensley, R-Townsend, who works in the real estate field. “Typically, this cost is split between buyer and seller. However, in the current competitive housing market, prospective buyers are often paying the entire tax to convince sellers to accept their offers.”
In 2017, Delaware’s realty transfer tax was effectively raised from 3% to the present level of 4%. The move was made as part of a revenue-generating package to bridge a major budget gap.
“This realty transfer tax hike was supposed to expire two years after it was imposed, and that was three years ago,” Ramone said.
A member of the budget-writing Joint Finance Committee, he is one of the sponsors of House Bill 358.
The move to cut the tax comes after two years of raging sales in the housing market, leading to tax windfalls for state and local governments. The market is also facing rises in interest rates with the Federal Reserve saying it will hike the base borrowing rates several times, partly to slow inflation in an overheated economy.
That has some real estate experts expecting a slow down in sales, partly because of the lack of new housing.
The revenue from the 4% realty transfer tax is split between state and local governments.
The state currently gets 62.5% of the proceeds, with the local presiding government collecting the remaining 37.5%.
The new bipartisan bill would reverse the state’s 2017 tax hike, restoring the effective combined realty transfer tax to 3%.
Under the measure, only the state’s share of the revenue would be impacted. The revenue flowing to local governments from home sales would be unchanged.
“Our high realty transfer tax is impacting two groups that can least afford it – millennials and seniors,” Ramone said. “If we can do something to both facilitate homeownership among young people while giving our older citizens a less costly opportunity to gracefully transition into their golden years, I think we have an obligation to do it.”
According to Long & Foster Real Estate, the median price of a home sold in Delaware as of February was $335,000.
HB 358 would reduce the transaction cost for the sale of such a home by almost $3,400.
Based on the latest estimates from the Delaware Economic and Financial Advisory Council, HB 358 would allow homebuyers and sellers to collectively retain more than $100 million annually.
Ramone stressed that he believes the tax cut is both responsible and sustainable. Delaware’s surplus revenue is expected to exceed $1 billion for the second consecutive year.
So far 13 Democrats and 15 Republicans are sponsoring or co-sponsoring the measure.
The legislation is pending action in the House Administration Committee.
From: Kathleen Rutherford, Executive Director, A Better Delaware
Delaware businesses and workers are subject to some of the most stringent regulations in the nation, leading to slower economic growth, less competition, and higher costs. The result is that companies able to afford regulatory compliance are often large corporations — a barrier to entry for Delaware’s small businesses.
According to a Feb. 2022 study by the Mercatus Center at George Mason University, Delaware has 95,976 regulatory restrictions on the books, ranking 30th in the United States overall.
When considered proportionally to the state’s workforce, however, Delaware ranks first in the nation for most regulations per capita. According to a 2019 study from the Mercatus Center, Delaware far exceeds other states with 11 words of regulatory language per Delaware worker.
In fact, the Center found that it would take 374 hours to read the entire Delaware Administrative Code.
Given those statistics, it’s no wonder that the CATO Institute cited Delaware’s expanding regulatory code as one reason the state has fallen from the top of economic freedom indexes.
“Delaware has lost tremendous ground during the past 20 years,” a CATO Institute analysis says. “It now ranks in or near the bottom third on all three dimensions of freedom, earning its 44th place by all-around poor performance.”
One area of particular concern is the over-regulation of occupational licensing, wherein trained professionals are required to get permission slips from the state to begin working.
A 2015 report published by the Obama administration warned that the current licensing regime in the United States creates substantial costs, and often the requirements for obtaining a license are not in sync with the skills needed for the job.
“There is evidence that licensing requirements raise the price of goods and services, restrict employment opportunities, and make it more difficult for workers to take their skills across State lines,” the Treasury Department report says. “Too often, policymakers do not carefully weigh these costs and benefits when making decisions about whether or how to regulate a profession through licensing. In some cases, alternative forms of occupational regulation, such as state certification, may offer a better balance between consumer protections and flexibility for workers.”
The report further found that more than 25 percent of workers in the United States require a license to do their jobs, with most workers licensed by the states. That’s a five-fold increase since the 1950s.
Delaware is no exception. According to a 2018 Institute for Justice study on the economic costs of occupational licensing, 15.15% of workers in Delaware are required to be licensed by the state and 8.73% are required to have additional certification.
While licensing requirements do, in some cases, offer health and safety protections to consumers and employees, many regulations simply hold small businesses down and prevent upward mobility for trained workers.
So, what can Delaware do to expand economic freedom and unleash workers from burdensome and unnecessary regulations?
One might look to a proposal in Tennessee, where a whopping 30% of workers require licenses to enter the profession of their choice, collectively costing them $279 million annually in new licenses and $38 million in license renewals.
There, the Beacon Center of Tennessee proposed a four-step plan to reduce the regulations’ drag on the state’s economy:
Occupational licensing should be curtailed or eliminated on low-income professions.
Tennessee should eliminate occupational licensing for professions with no measurable and realistic threat to consumer safety.
Policymakers should strictly control the extension of occupational licensing to new professions
Improve public access to data on licensed occupations so researchers can better measure the costs and burdens of licensure and how many Tennesseans
These common-sense steps would work as well in Delaware as they would in Tennessee and would do nothing to eliminate licensure requirements that legitimately protect the health and safety of consumers and workers.
Delaware legislators are exempt from Delaware’s ethics laws leading the State to become one of the most corrupt in the Nation. This can be fixed.
Delaware has a decades-long history of corruption by elected officials. The title of this article, “People want to give us gifts,” is a quote that was made by former State Senator and eventual Senate Pro Tem, David McBride (D-Hawks Nest) in late 2013 during the scandal that followed the release of the Report of Independent Counsel on the Investigation of Violations of Delaware Campaign Finance and Related State Laws by E. Norman Veasey, former Chief Justice of the Delaware Supreme Court (Source: The News Journal).
It is the attitude demonstrated by former Senator McBride, which can still be found among Delaware’s elected officials, that drives the increasing demand for ethics reform in Delaware.
Delaware Remains Comfortable with Corruption
Despite the extensive media coverage and some weak follow-up legislation post the Veasey Report, Delaware remains one of the worst State’s in the Nation in terms of public corruption.
In 2015, the non-partisan Center for Public Integrity released an updated report measuring and ranking each State in 13 different criteria. The report excoriated every State (the highest rank was only a ‘C’), but special condemnation was aimed at Delaware for ranking 48th in the Nation – specifically in the areas of Legislative Accountability and State Pension Fund Management.
Two years later, in 2017, The Daily Beastreported that Delaware was the 4th most corrupt State in the Country (trailing only to Tennessee, Virginia, and Mississippi). The article’s author notes explicitly, “[s]ome states show particular prowess in one area of corruption or another. New York leads with racketeering and extortion, Delaware is tops in embezzlement…”
Why might the Center for Public Integrity and The Daily Beast have such low opinions of Delaware’s lawmakers and their ethical considerations? Because Delaware’s legislators have exempted themselves from Delaware’s ethics laws.
A quick read of Delaware Code Title 29, Chapter 58, Section 5804, Paragraphs 12 & 13 shows that members of the General Assembly have exempted themselves from Delaware laws relating to both “Conflicts of interest” and “Code of Conduct.” Furthermore, in the unlikely case of a decision by the Public Integrity Commissionon a legislator matter, the legislator simply can require the decision to remain confidential from the public.
Deborah Moreau, the Delaware Public Integrity Commission’s lawyer, and sole staffer says state law “leaves the Delaware General Assembly with something of an honor system when it comes to public ethics laws.”
Sadly, this issue seems unimportant to Governor Carney, whose recommended operating budget for the Commission during his leadership has barely increased (see graph below).
(Graph source: https://pirs.delaware.gov/#/)
Necessary Improvements
Justice Veasey and later reformers have been stymied in attempts to get real reform in Delaware. State law was and remains too weak, and the Public Integrity Office has no teeth. We can improve our system, and here are some recommendations:
1. Audit state legislators’ personal financial disclosure documents and make the disclosure documents and audits on the Public Integrity Commission website available for download.
2. Eliminate the exemption of State Legislators from Delaware’s Conflict of Interest and Code of Conduct statutes.
3. Require Delaware legislators to disclose the business and/or economic entities from which they receive any earnings, compensation, or equity returns. This disclosure should also include spousal/partner sources of earnings, compensation, or equity returns.
4. Change Delaware law so that legislators have a one-year waiting period between serving in the legislature and receiving a job with a non-profit that receives over 25% of its budget or over $1MM from the state government.
Summary
“If men were angels, no government would be necessary,” James Madison, primary author of the Constitution, wrote memorably in Federalist 51. Madison then continued that a “dependence on the people is, no doubt, the primary control on the government.” For the people of Delaware to control their government, they need to ensure that their legislators are acting ethically, but our legislators have exempted themselves from this oversight. As a result, Delaware has become one of the most corrupt states in the Country, which is an embarrassment for all.
Minnesotans are getting back into the workforce. According to new numbers, Minnesota’s unemployment rate in February was the lowest in decades. And fortunately, this is due to people moving into the workforce.
Minnesota’s unemployment rate dipped last month to the lowest it’s been in more than 20 years as the state’s labor shortage remains intense.
The jobless rate ticked down two-tenths of a percent to 2.7% in February, the Minnesota Department of Employment and Economic Development (DEED) reported Thursday.
That’s more than a full percentage point lower than the U.S. unemployment rate, which was 3.8% last month.
A number of issues still remain, however. For one, our state is yet to recover more than 100,000 jobs that have been lost since the pandemic started. Moreover, our labor force is still shrunken.
Minnesota’s labor force is about 106,000 workers smaller than it was before the pandemic, when the participation rate was about three percentage points higher. The pandemic spurred some workers to retire early and led others to drop out of the workforce due to childcare and other challenges.
And the number of employed people is 122,000 below where it was in February 2020. Minnesota has recovered about 71% of the jobs it lost in March and April 2020, when many businesses were forced to close as COVID-19 spread across the country.
How to get Minnesotans back to work
While economic trends are susceptible to some general trends, Minnesota’s recovery has, in general, lagged most states. Our high taxes and strict regulatory policies are largely to blame for that trend. Fortunately, there are a couple of reforms that lawmakers could take to make it even much easier for Minnesotans to get back to work.
Unemployment insurance Tax
High unemployment insurance taxes make hiring workers expensive, and they ultimately lower wages for workers. Legislators need to work on replenishing the unemployment insurance trust fund to ensure that businesses are not burdened by higher unemployment taxes for much longer.
Income taxes
High income taxes raise costs for businesses and discourage individuals from undertaking economically productive activities. The state of Minnesota lagged most states in business creation in recent years, and one of the big causes of that is our high taxes.
New businesses are, however, a huge driver of job creation and economic growth. Legislators should cut taxes in order to spur investment, job creation, and economic growth and get more Minnesotans into the workforce.
Occupational licensing
Burdensome occupational licensing rules keep low-income Minnesotans out of the workforce. Moreover, they prevent workers from other states from moving to Minnesota.
Low-income workers have been especially burdened by job losses during the pandemic. Making it easier for them to obtain licenses in low-risk occupations like cosmetology would encourage entrepreneurship and employment.
The minimum wage
Minimum wage law is a huge driver of unemployment, especially among youth and low-skilled workers. While legislators have little control over regional minimum wage policies, they can change state policy.
Lawmakers need to abolish the state-wide minimum wage law and make it easier for businesses — especially small businesses — to hire low-skilled and younger workers who have been especially hurt by job losses during the pandemic.
Without reform, the future looks bleak
Even before the pandemic, Minnesota was lagging other states in economic growth. This pandemic has merely worsened that trend. Fiscal and regulatory reform is not only necessary, but urgent.
Our economy needs to be able to compete with other states and other countries for skilled workers and capital. Our high taxes and burdensome regulations make that difficult to do. And without reform, legislators only risk worsening current trends.
Citing a study that calls Delaware one of the 10 worst states to start a business, Delaware’s GOP leaders are re-introducing a bill that would require new state regulations take the economic impact of small businesses into account.
WalletHub declared Delaware just the 42nd best state in the country to start a business, and State Rep. Charles Postles (R-Magnolia/Frederica) said it’s partially because Delaware makes rules that hurt smaller businesses owners.
“I also understand that it’s easy for agencies to make regulations that have the weight of law, and sometimes have an overbearing effect on small businesses.”
WalletHub said they used data including number of startups per capital, cost of living, business environment, and access to resources, among other metrics.
Conversely, Delaware is rated No. 6 in the best states for overall business by U.S. News and World Report.
The bill is expected to be similar to last session’s HB167, that was sent to the House Administration Committee on May 30, 2019, and never even was discussed in committee before the session ended in June 2020.
Postles said he’s trying to speak up for businesses owners.
“I’ve had entrepreneurs, small businesspeople, trying to get started or expand their business telling me that it’s increasingly difficult to do.”
The bill would require as part of the periodic review of regulations that any process minimize the impact on small businesses, and see if there are conflicts with federal, state, or local restrictions.
Postles said his updated version of the bill will contain provisions that would block any new regulation that doesn’t comply with economic impact disclosure reforms.
“I’m just asking that they look at the regulations that they are imposing and do it in the least intrusive and least costly method.”
