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Can Dover Resist the Bait?

John Dryden, famous English poet, once wrote “Better shun the bait, than struggle in the snare”. While written with a different context and sentiment in mind, it is a cautionary tale that can easily be applied to the situation currently being faced by leaders in Dover.

During this upcoming state budget cycle, Delaware finds itself in the fortunate and rare position of dealing with the largest budget surplus in Delaware’s history. The Delaware Financial Advisory Council (DEFAC) estimates the budget for 2022 will contain a surplus of $1 billion.  Much of the surplus is the result of federal stimulus monies.

As such, budget surplus, often viewed as found or free money, is tempting “bait” hard for elected officials, to resist to fund pet projects, appease special interest groups, or plug a financial gap left by poor financial planning. These are all efforts that typically provide only short-term gains and are often more fueled by political motivations with upcoming elections or re-elections in mind.

The “snare” is the continuing financial burden and obligation for these new or expanded programs.  Gov. Carney has already committed $347 million of the surplus to future projects, according to  Delaware Live,  including a $50 million Clean Water Fund. With a robust budget why are we not considering tax cuts as well to increase economic growth?

After a difficult year, we have been presented with a rare gift that could move Delaware forward financially and economically in this post pandemic world. Other states are already showing the way.

Our neighbors in Maryland have created a within their Financial Incentives for Businesses initiative a Job Creation Tax Credit for businesses that create a minimum number of new full-time positions may be entitled to state income tax credits of up to $3,000 per job or $5,000 per job in a “revitalization area.” https://commerce.maryland.gov 

New Mexico’s S.B. 1 2021 was signed by its governor on March 3 and grants a $600 income tax rebate to families and individuals claiming the state’s working families tax credit, and, for businesses, establishes a holiday on gross receipts taxes for food and beverage establishments. https://www.journalofaccountancy.com/news/2021/mar/federal-coronavirus-aid-could-hobble-new-state-tax-cuts-credits.html

The United States Treasury Department recently issued comprehensive guidance on how States could use funds from the American Rescue Plan that would help implement tax reform efforts that could have long term lasting impacts for better budget planning and forecasting.  These tax reforms include:

  1. Protect businesses from the factory tax
    Perhaps the most pro-growth change enacted in the 2017 Tax Cuts and Jobs Act (TCJA) was 100 percent bonus depreciation for business investments in machinery and equipment, also known as full expensing. This relieved manufacturers and other businesses of the so-called “factory tax.”
  2. Use revenue from interest cost deduction limitation to lower business tax rates States can remain conformed to the 163(J) limitation on business interest costs, which will produce additional revenues in upcoming years, and then use the resulting revenue to make a pro-growth change such as reducing the overall business tax rate in a manner that is revenue neutral.
  3. Cancel the upcoming innovation tax Current federal law allows businesses to deduct research and development costs in the year they are incurred. States could make costs permanently deductible in the year they are incurred. This would prevent a growth-reducing tax increase on the innovation economy and would not violate the “tax mandate” because it would reduce taxes relative to the FY 2019 baseline.
  4. Provide more rapid tax rebates for businesses that experienced pandemic losses from 2018-2020
    The TCJA also made changes to business net operating losses(NOLs) that restricted business ability to achieve rapid tax rebates when they experience income losses.

Spending the surplus was never going to be a problem for decision makers in Dover. Spending the funds in a way that resists the “bait” and puts Delaware on a path that is not just a recovery from COVID, but a path to longer-term economic growth is the challenge.

Our state’s fiscal year starts July 1st and the budget for it must be passed by the Delaware General Assembly by June 30th.  Contact your legislators if you believe that they should vote for a budget that focuses on proactive initiatives that sustain and grow Delaware’s economy.

 

 

Republican bills would cut taxes in wake of state’s revenue windfall

From: Delaware Live

Delaware House Republicans have filed five bills that will cut taxes, saying the state should share its unexpected financial fortune with residents and businesses.

Among other things, the bills would  cut the state personal income tax by 10%, cut corporate income tax by nearly 30%; and slash the gross receipts tax – which companies pay on sales – by 50%.

That would allow impacted taxpayers to collectively retain more than $420 million annually, the Republicans said in a press release Tuesday.

“This is an economic development bill,” said Rep. Rich Collins, R-Millsboro, is sponsoring House Bill 91, which would do those things. “In recent years, Delaware has had one of the worst economic growth rates in the nation. I believe allowing people and businesses to keep more of their own money will jumpstart investment, increase employment, and raise starting wages. The state will reap the benefits of this too, as better economic performance produces higher revenue.”

Efforts were not successful Tuesday to reach Democratic leadership for comment on the bills.

The Republicans said in their press release that the State of Delaware is flush with cash and they want to share it with taxpayers. Read more:https://push.delawarelive.com/republicans/ 

Gov. Hogan says Maryland will end extra $300 weekly payments, other federal unemployment programs

From The Baltimore Sun 

Maryland will stop paying jobless residents an extra $300 a week soon and will end other federal pandemic unemployment programs, Gov. Larry Hogan announced Tuesday.

The changes will take effect in early July. In addition to cutting off the weekly $300 boost, Maryland will discontinue three other programs — including aid for the self-employed and gig workers — and will require claimants to show that they are looking for a new job.

The federal programs were extended until September under the American Rescue Plan Act, passed by Congress in March, but a number of Republican governors have announced that they will opt out of them early. Maryland is the 24th state to do so.

Business groups, including the U.S. Chamber of Commerce, have called for states to end the enhanced benefits. Read more:https://www.baltimoresun.com/politics/bs-md-extra-unemployment-ending-20210601-j5eq6dxz5jcbrjr5z3o52ctfri-story.html 

State lawmakers announce new ‘Life Science Caucus’

From: Delaware Public Media A bipartisan group of Delaware lawmakers is creating a new caucus devoted to the First State’s growing science sector.

State officials announced the creation of the Life Science Caucus Monday to address issues in industries like biopharmaceuticals and gene-editing in Delaware’s General Assembly.

The caucus will work with the Delaware Prosperity Partnership and the state’s private sector with the goal of offering incentives and facilitating tech-based economic development.

State Rep. Mike Ramone (R-21) says he thinks it’s a good strategy, given Delaware’s small size, that it should try to cater to a particular niche business sector for growth and expansion.

“I think that this bio-sector niche and what we can do in Delaware—developing partnerships with the universities and the business sector—we could be a sweet spot for this,” said Ramone.

Delaware’s life and bioscience industries already generate billions each year in economic output. They employ more than 8,000 people. The industry’s average salary is more than $100,000. Read more: https://www.delawarepublic.org/post/state-lawmakers-announce-new-life-science-caucus

Publisher’s View: Delaware’s leaders need to rethink federal benefits

From Delaware Business Times: The news that Gov. Carney and the state Department of Labor is reinstating the requirement that Delawareans on unemployment demonstrate that they’re looking for work is a good step to trying to get people back to work.

Rob Martinelli
President
Today Media Inc.

Delaware has 31,000 people receiving up to $400 per week from the state.  Many of us are intrigued by decisions being made in almost half of the other states to opt out of the $300 in additional weekly federal benefits. Missouri Governor Mike Parson told CNBC, “While these benefits provided supplementary financial assistance during the height of COVID-19, they were intended to be temporary, and their continuation has instead worsened the workforce issues we are facing.” Read more: https://delawarebusinesstimes.com/news/delaware-needs-to-rethink-federal-benefits/

Delaware lawmakers OK pay hikes and pension increases

From Bay to Bay News:

DOVER — Delaware lawmakers wrapped up budget markup after just two days this week, setting the stage for the final month of the 2021 legislative session.

Legislators approved a number of aspects of Gov. John Carney’s January recommendations for the operating budget, adding roughly $60 million to that spending plan to bring the total to about $4.77 billion. There’s also a supplement containing some one-time funding that comes to $221 million, which represents a sixfold increase there.

Though the Joint Finance Committee was scheduled to meet for up to six days, it only needed two. Lawmakers breezed through the budget-markup process, aided by a glut of revenue in the form of an extra $750 million or so since the governor unveiled his budget proposal.

The extra money makes the job easier for legislators in one sense because they do not have to debate cuts to services or tax hikes, though it does  demand for more funding from many areas. Read more here:  https://baytobaynews.com/stories/delaware-lawmakers-ok-pay-hikes-and-pension-increases,49182

The Summer Season is Here, But Workers Are Not

From WBOC:

DELMARVA – Business owners say say this could be the busiest summer in Delmarva’s history, and it all kicks off this weekend with Memorial Day.

Workers are needed to deal with the unprecedented crowds, and store owners say they still need more help.

Local hotel manager Benjamin Gray says the crowds will only get bigger from here.

Gray said, “It’s a recovery like I’ve never seen before. I’ve been in this industry for over a decade, and I’ve never seen anything like this.”
He says staffing is the number one concern in the hospitality industry, and for his business, the cleaning staff is slim.

“Not many people want to go off of unemployment to clean rooms, so that’s the main issue we’re running into. Also front desk seems to hurt a little bit as well, but primarily housekeeping, that’s where we have the dire need for this particular market,” Gray said.

But Seacrets in Ocean City says their need is everywhere. “We’ve got something for everyone. Kitchen, bars, wait staff, even AV with all our entertainment, so you can go to our website and apply there. More and more people are coming down, so we’re just hoping to fill those spots,” said Seacrets’ Marketing Manager Jackie Weisenberg.
Read more:https://www.wboc.com/story/43971205/the-summer-season-is-here-but-workers-are-not

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Delaware auditor launches effort to track Rescue Plan funds

From Bay to Bay News:

DEWEY BEACH — Whether it’s one penny or a billion dollars, governmental accountability and transparency are paramount, says Delaware Auditor Kathy McGuiness.

On Wednesday morning in Dewey Beach, Ms. McGuiness — flanked by officials from several Delaware municipalities — unveiled what she calls a historic statewide initiative to track how school districts and local and county governments spend the $1.25 billion they are receiving in American Rescue Plan Act funds.

“The premise of this initiative is simple — Delawareans will be able to see and compare how their county, the municipalities and school districts are spending the millions in tax dollars they receive from the American Rescue Plan,” said Ms. McGuiness. “Through this project, I am encouraging every Delaware citizen to become a citizen watchdog. The execution of this initiative is also simple — county and municipal officials will go to the secure portal on my website and put in the details of where they have spent their ARP funds each week.”

The initiative is named “Project: Gray Fox” in honor of Delaware’s state animal, Ms. McGuiness said.

“For most Delawareans, the third stimulus payment they received this spring is likely either spent on bills or put into savings already,” she continued. “But for county and local government officials, as well as school district officials, the $1.25 billion in ARP funds they will receive have yet to appear in their bank accounts.”  Read more: https://baytobaynews.com/stories/delaware-auditor-launches-effort-to-track-rescue-plan-funds,49079

American biomedical innovation is leading the world: Why would we stifle that? | Opinion

 

From Delawareonline: President Joe Biden was spot on when he recently told Congress that continued investment in research and development is essential to our country’s global leadership and economic security.

Fortunately, the American bioscience sector is a shining exemplar of our nation’s unparalleled ability to nurture and produce engines of innovation that both benefit humankind and drive extraordinary economic opportunity at home through just that kind of sustained investment.

The dramatic impact of this biomedical renaissance couldn’t be clearer:  Vaccines and therapeutics developed and produced in record time and at an unprecedented scale are leading the world out of the deadly clutches of a catastrophic pandemic.

Yet, despite this historic success story, a proposal is being considered in Congress that would jeopardize this leadership by applying foreign pricing models to breakthrough medicines. Read more:https://www.delawareonline.com/story/opinion/contributors/2021/05/21/delaware-leads-american-biomedical-innovation/5166978001/

Gov. Hogan lifts all COVID-19 capacity limits on businesses, restaurants in Maryland

 

From: Delmarva Now  Maryland will lift nearly all remaining COVID-19 restrictions on businesses, restaurants and venues across Maryland on Saturday as vaccines make progress in slowing the virus’s spread.

Gov. Larry Hogan said capacity limits on indoor and outdoor dining, entertainment venues, sporting events and all businesses will end in response to improving COVID-19 metrics.

“Effectively, as of Saturday, every business in Maryland will be able to open at 100% with no restrictions,” Hogan said Wednesday.

Read more: https://www.delmarvanow.com/story/news/local/maryland/2021/05/12/maryland-covid-hogan-lifts-capacity-limits-businesses-restaurants/5062563001/