In The News

Marijuana legalization fails after stunning series of events, political maneuvering

From: Delaware Live!

The bill to legalize recreational marijuana in Delaware came to a stunning end in the House of Representatives when it failed after a series of events:

• A two-hour-long recess was called by Speaker of the House Pete Schwartzkopf so the Democratic caucus could meet.
• Rep. Jeff Spiegelman, a Republican who previously signaled support for legalization, announced that he would not be voting because of a conflict of interest. He did not elaborate.
• Rep. Mike Smith, a Republican who had publicly stated that he would be voting for the bill, introduced four amendments, three of which failed. He did it, he said, to “prove that [Democrats] do not care about bipartisanship” and then withdrew his support.
• A hastily conducted roll call fell short by two votes.
• The bill’s sponsor, Rep. Ed Osieski, waited too long to switch his vote from yes to no. That would have allowed him to bring the bill back to the floor later in the legislative session.

The bill needed a ⅗ majority, or 25 votes, to pass.

It received 23 yes votes and 14 no votes with 4 not voting:

A House rule would have allowed the bill to be reintroduced later in the legislative session by any representative who voted against the measure.

For that reason, Osienski attempted to change his vote from yes to no after the roll call ended but before Schwartzkopf banged his gavel.

Osienski spoke up too late. Here’s the exchange:

Osienski: “Mr. Speaker — I was going to change my yes vote to a no.”

Schwartzkopf: “Little late now. Can’t do it now.”

House Majority Leader Valerie Longhurst: “Can we rescind the roll call?”

Schwartzkopf: “Huh?”

Longhurst: “Can I rescind the roll call?”

Schwartzkopf: “You don’t need to.”

Longhurst: “Can’t rescind it?”

Schwartzkopf: “You can’t do it. They’ve already called it down.”

Multiple members asked aloud if the roll call could be rescinded. Others said it couldn’t because the vote had already concluded and Schwartzkopf’s gavel was down.

That means that for the bill to be reintroduced in 2022, either a Republican or Schwartzkopf – who did not vote for the bill – would have to reintroduce it. That seems unlikely to happen.

Schwarzkopf announced that the House would recess until 2 p.m. Tuesday.

In a press release after the session, Osienski said “For the past several years, the majority of Delawareans have been clear that they support legalizing recreational marijuana for adult users. We have heard from numerous members of the public – advocates, veterans, retired law enforcement officers, educators and even faith leaders – who have overwhelmingly voiced support for legalizing adult recreational marijuana.”

“During that time, we have had numerous meetings with stakeholders, made several changes to our legislation, and engaged lawmakers to answer their questions and attempt to address their concerns. After all of this effort, I believe we owed it to the residents of Delaware to hold a full floor debate and vote on this issue. While I’m deeply disappointed by the outcome, I still firmly believe that Delaware is more than capable of successfully enacting policies for safe and legal cannabis, and I will continue working on this issue to win the support to make it a reality.”

“For the advocates who have put in the time and effort these past four years, I’m grateful for your support and your passion on this issue, and I hope you will continue to make your voice heard on this issue. Throughout my time in the House, I’ve seen advocates sway opponents to various bills, and I believe legal recreational marijuana for adult users is no different.”

Here’s how states can end corporate welfare

From: The Hill Get ready for a wave of corporate welfare. Lawmakers are back in state capitols, and they will surely introduce and enact a slew of subsidies for big business — a time-honored tradition embraced by both parties but despised by taxpayers. Historically, convincing lawmakers to do anything different has been impossible, since they see giveaways as essential to competing with other states. Yet there is a workable solution to this problem, and it’s quickly gaining bipartisan support.

Lawmakers in as many as 22 states are pushing legislation that would create an anti-corporate welfare interstate compact, an idea that first arose in 2019. Essentially, these measures would permanently ban each state from doling out business subsidies, whether tax incentives, credits, abatements or direct cash payments. The compact would only go into effect once multiple states sign these bans into law, so none would have to unilaterally disarm in the fight to attract and keep companies. Progressive lobbyist and Illinois native Dan Johnson is the lead advocate for this policy.

State and local spending on corporate welfare has ballooned to at least $95 billion, up 200 percent in the past 30 years, and nearly twice as much as public funding for fire protection. Every state throws money at corporations, and while most don’t report the true totals, the evidence that exists is deeply concerning. New York alone has doled out at least $40 billion to more than 135,000 companies in recent years. Five other states — including my home state of Michigan — have given away more than $10 billion, and at least 35 states have spent more than $1 billion in business subsidies.

Research shows that such handouts accomplish little to nothing. They can harm economic growth, since politicians aren’t well-suited to figure out which companies will succeed or fail. They typically do not create the promised number of jobs, since the economy is constantly shifting and politicians can’t see into the future. Most importantly, corporate welfare is unnecessary, since up to 98 percent of companies would have moved to or stayed in a certain state without the taxpayers’ unwitting help.

But sound public policy isn’t the point. Politicians — on the left and right — use business subsidies to make big announcements. The thinking goes that convincing a big corporate name to set up shop, or stopping a local legend from leaving, will help come the next election.

Hence, the monster subsidies of recent years. In 2017, Wisconsin offered $2.9 billion in subsidies to help Foxconn build a $10 billion factory, in a blatant bid by former Gov. Scott Walker to look good on the issue of jobs. Amazon famously pitted decently sized cities in America against each other in the search for its HQ2 location. Lawmakers in the two winning locales, Virginia and New York, respectively promised at least $750 million and more than $1.5 billion. Nationwide, politicians routinely pony up taxpayer cash for companies that are synonymous with their state — see Boeing in Washington, the Big Three automakers in Michigan, and oil companies in Louisiana.

Yet the massive — and increasingly visible — growth in giveaways is finally creating a public backlash. Voters don’t want politicians to give taxpayer money to corporations that often add billions in shareholder value while paying little in taxes of their own. In Wisconsin, Walker lost his 2018 reelection bid in part because of widespread opposition to the FoxConn deal, while a public outcry caused Amazon to withdraw HQ2 from New York. Florida lawmakers have even cut funding to Enterprise Florida, one of the state’s main subsidy providers. Texas lawmakers recently phased out a subsidy program altogether, although others remain.

Corporate welfare is getting harder to justify, making it easier to end through an interstate compact. Sensing the public mood, Democratic and Republican lawmakers in states such as Michigan and Rhode Island have joined forces in the effort to ban it. The Utah House of Representatives passed the bill in an overwhelming and bipartisan vote of 63 to 3 in 2020, and the head of the state’s incentive program has come out in support of repealing them. The groundswell of support from both sides of the aisle is impressive, especially for such a new idea, and a record number of state lawmakers are expected to support an interstate compact in their 2022 legislative sessions.

Realistically, a large-scale ban on corporate welfare is still years away, since multiple states have to pass legislation before the compact would go into effect. Yet the case for action is growing stronger, and opposition to business subsidies is growing more popular. States should compete on quality of life and their overall economic climates, not how much taxpayer money they can throw at big business. The sooner that realization becomes reality, the better.

State Legislatures Take Up Tax Reform in 2022

From: Tax Foundation

If 2021 was a big year for state tax reform, 2022 may give it a run for its money. With January now in the books, the 40 states which have convened their legislative sessions—six more will join them, while four states’ legislatures do not meet in odd-numbered years—already show a flurry of activity on taxes, with arrows almost invariably pointing toward tax reform and tax relief.

With 7,383 state legislators and about 100,000 bills introduced each year, it’s possible to find introduced legislation doing almost anything, and sometimes in the early stages of session, it can be difficult to determine which proposals should be taken seriously and which will fall by the wayside. Nevertheless, it’s worth surveying the landscape to see which bills are garnering attention and, in some cases, already moving rapidly through legislative bodies. No such list could possibly be exhaustive—any given state likely has more introduced bills on tax-related subjects than are covered in this entire review—but here’s what we’re following as we look toward February.

Individual income tax rate reductions are the most common proposal. At present, 13 states have legislation worth watching that would cut individual income tax rates: Colorado, Idaho, Indiana, Iowa, Michigan, Mississippi, Missouri, Nebraska, New York, Oklahoma, South Carolina, Utah, and West Virginia. Additionally, nine states—with significant overlap—have noteworthy proposals to cut corporate income taxes: Colorado, Idaho, Indiana, Iowa, Kansas, Michigan, Missouri, Pennsylvania, and Utah. Both lists are likely to grow as sessions continue.

Meanwhile, five states—Connecticut, New Mexico, Tennessee, Washington, and West Virginia—have legislation or governor’s proposals to cut sales tax rates. While most, but not all, of the proposals to cut income taxes are championed by Republicans, all five serious efforts to cut sales taxes have come from Democratic lawmakers. Both Republicans and Democrats, however, have proposed exempting groceries from sales tax bases, or expanding current exemptions, in Alabama, Colorado, Illinois, Kansas, and Mississippi.

Thus far, meaningful efforts to raise taxes—excluding proposals for net tax cuts which have partially offsetting rate increases elsewhere—have been proposed in only two states, Hawaii and Massachusetts. Given robust revenue growth (state tax collections rose 21 percent last year) and projections of significantly higher revenue for the foreseeable future, most states are exploring ways to return some of their increased revenue to the taxpayers.

Sussex County launches online portal to enhance financial transparency

From: Bay to Bay News

GEORGETOWN — Sussex County is putting it all out there when it comes to its finances.

On Tuesday, finance director Gina A. Jennings unveiled to County Council a financial information portal on the county’s website that allows users to see how taxpayer money is being spent.

Users can search information on the county’s annual budget and its “checkbook” of day-to-day transactions, as well as payroll expenses by department.

The information can be searched, sorted and graphed, even shared via social media.

The portal, which is tied into Sussex’s Munis financial software, pulls real-time information and displays it through a series of tiles, charts and graphics. Creation of the portal was made possible by the county’s nearly $45.5 million in American Rescue Plan Act funds and to satisfy growing interest in how public dollars are spent.

“It is my hope that the public will utilize this site, not only to see how the county spends the ARPA funds but to see how we utilize their tax dollars — their investment in people and programs — each and every day,” Ms. Jennings said. “This is enhanced transparency. It’s just good government.”

While demonstrating how the portal works, she added, “This started when we knew ARPA funds were coming. We feel like there is a need to put it out there to the public of what our finances are.

“I am very happy with it. There shouldn’t be any questions on what we are doing in the Finance Department.”

County Council President Michael H. Vincent concurred.

“This is certainly a great tool, for you and for the county and for the public,” he said. “It’s all transparency.”

The portal is available here.

Report: Federal unemployment benefits kept millions from returning to work

From: The Center Square

1/1 Gale Warning (Moderate) – Maryland: Del. General Assembly announces plan for March session

From:47ABC News

DOVER, Del. – As the Delaware General Assembly plans to return to session next week, legislative leaders have announced several changes to previous COVID-19 restrictions for Legislative Hall.

House Speaker Pete Schwartzkopf and Senate President Pro Tempore Dave Sokola announced Friday that as a result of significant declines in case counts, hospitalizations, and positive test results, Legislative Hall will re-open to the public on session days.

Staff, lawmakers, and visitors will no longer be required to wear masks or face coverings in the building, although it is strongly recommended in gatherings where people cannot maintain safe social distancing. Unvaccinated individuals are strongly encouraged to wear a mask at all times when interacting with others, especially in public settings. Additionally, legislative staff and legislators will no longer be required to show proof of vaccination, or a negative COVID-19 test to be able to enter Legislative Hall.

Both the House and Senate will meet in person at Legislative Hall to consider legislative agendas during the month of March. House and Senate committees will continue meeting virtually via Zoom until further notice. Members of the public will be able to attend all virtual committee meetings and deliver comments on pending legislation. Legislative session will continue to be broadcast online on the General Assembly website.

On session days, a limited number of seats in the gallery of each chamber will be available to members of the public on a first-come, first-served basis. The foyers, cafeteria seating area, and library will be open to the public. Guests wishing to meet with their legislators are encouraged to call ahead of time to schedule an appointment.

The House and Senate floors will be closed except to members, staff, special guests, and witnesses. The cafeteria will be closed for food service, but seating will be available for those needing workspace.

Transparency in public education – a parental right – a state obligation

From Charlie Copeland, Director Center for Analysis of Delaware’s Economy & Government Spending, Caeser Rodney Institute

Op-Ed: Historic tax reform achieved – Gov. Reynolds, Iowa Legislature deliver for taxpayers

From: The Center Square 

The Iowa legislature on Thursday passed a historic tax reform measure. Going into the 2022 legislative session, Gov. Kim Reynolds and the Republican-led legislature made tax reform a priority. The tax relief bill passed by both chambers phases in a 3.9% flat rate for individual income tax by 2026, a major reduction from today’s top marginal rate of 8.53%. Beginning next year, Iowans will no longer pay taxes on retirement income. And the reforms will also pare down Iowa’s corporate tax credits while lowering our top corporate tax rate of 9.8% to a flat 5.5%.

All taxpayers in Iowa will see tax relief in this package of tax cuts; Senate Majority Leader Jack Whitver estimates this will save Iowans an average of $1,326 on their taxes on an annual basis. This is real money and Iowans are looking forward to an improved tax code. An ITR Foundation poll released this week shows 57% of Iowans support a new, low flat tax, while only 24% of Iowans oppose the change.

One of the major economic lessons from the past few years can be gleaned from the population changes in high and low tax states. States with low, or even no income taxes, are gaining population and creating more economic growth. Conversely, states with high tax rates and a penchant for government spending are losing population and seeing poor economic growth.

Just how significant are these reforms? A brief examination of Iowa’s income tax history will demonstrate the magnitude of this victory for taxpayers. In 1934, the first income tax (and sales tax, for that matter) was levied in Iowa to provide property tax relief. The rates in 1934 ranged from 1% to 5%, spread over five tax brackets. The corporate tax was introduced at 2% that same year, and eventually grew to become the highest corporate tax rate in the nation at 12%.

Individual income tax rates continued to increase until they reached a high point of 9.98% in 1987. In 1998, a 10% across-the-board rate cut brought the top rate down to 8.98% with nine tax brackets.

During her first year in office (2018), Gov. Reynolds made tax reform a priority and the legislature responded by passing, at the time, the largest tax cut in Iowa history. The individual income tax still had nine brackets, but the top rate was immediately lowered to 8.53%, with additional cuts planned, subject to future revenue triggers. Iowa’s 12% corporate income tax rate was reduced to 9.8% in 2021 as part of those changes, along with a modernization of Iowa’s sales and use tax.

In 2021, the legislature passed another tax reform measure, which not only phased-out the obsolete inheritance tax, but it also repealed the revenue triggers which had been established in the 2018 law to guide further individual income tax rate reductions. By repealing the triggers in 2021 the top rate would be lowered to 6.5% in 2023.

While the reforms passed in 2018 and 2021 were great steps in the right direction, this year’s set of income tax reforms dwarfs them. Under the new tax reform measure passed by the legislature this week, individual income tax rates will be reduced as follows:

• 6 percent (2023)
• 5.7 percent (2024)
• 4.82 percent (2025)
• 3.9 percent (2026)

In 2026 the individual reforms will be complete with all Iowans paying a flat, 3.9% income tax. And of course, the aforementioned exemption on retirement income begins next year.

The path to corporate rate reduction is slightly different. In addition to reducing the amount of tax credits that can be refunded to a corporate taxpayer, the top rate corporations pay will be reduced as corporate tax revenues grow. This ratcheting down will be complete once a flat rate of 5.5% is reached.

A critical part of Iowa’s successful tax reform story is often forgotten. The reason why Gov. Reynolds and the Republican legislature have been able to enact meaningful pro-growth tax reform since 2018 is because they have adhered to prudent budgeting. By practicing fiscal conservatism and keeping spending growth restrained, tax reform was made possible. “So how did we get there? We stuck to conservative budgeting practices,” Gov. Reynolds said in addressing a room full of Iowans for Tax Relief and NFIB members just this week. “There is nothing more vital than seizing the opportunity to return taxpayer dollars back to Iowans.”

It’s no surprise that Gov. Reynolds was chosen to give the GOP response to President Joe Biden’s State of the Union speech next week. In addition to being an example of how conservative leadership works, Iowa is becoming a national leader on state tax policy. Our state’s progress is a story worth sharing.

Tax Rates Matter

From: ITR Foundation Tax rates matter. Whether it is allowing individuals to keep more of their hard-earned income or creating a more competitive economic climate, tax rates have a significant impact on a state. States are in economic competition with each other for both businesses and people. It is important for Iowa not to become complacent as numerous states are looking at reducing tax rates in 2022. Governor Reynolds and the Republican led legislature are making sure that Iowa does not become complacent by making tax reform a priority.

The Tax Foundation’s 2022 State Business Tax Climate Index provides a good overview of each states’ tax climate. Iowa’s ranking has improved and is ranked 38 out of 50. Previously, Iowa was in the top ten states for worst tax climate.  A reason why Iowa’s ranking has improved is the significant progress that is being made on reducing tax rates.

Since 2018, Iowa has been working to lower income tax rates to provide tax relief and create a more competitive economy. Last year, Iowa’s corporate tax rate fell from 12 percent, the highest in the nation, to 9.8 percent, which ties with Minnesota. In addition, the legislature passed a tax reform measure that will ensure that the individual income tax will be reduced to 6.5 percent in 2023 and it phases out the inheritance tax.

Governor Reynolds, who has made tax reform a priority, has recently introduced a pro-growth comprehensive tax reform plan. The proposal calls for lowering the individual tax to a flat 4 percent rate by 2026. Governor Reynolds is also pushing to lower the corporate tax to be reduced from 9.8 percent to a flat 5.5 percent. Finally, her proposal will eliminate taxes on retirement income.

Governor Reynolds is demonstrating that fiscal conservatism works. Prior to the pandemic, Iowa’s fiscal house was in strong condition. During the pandemic the Governor kept the economy going and Iowa’s economy was able to weather the economic impact of the pandemic. Currently, Iowa’s budget has a $1.24 billion surplus and revenue projections are healthy. The surplus is expected to continue to grow. Iowa’s Taxpayer Relief Fund, which already has a $1.8 billion balance is estimated to grow to $2 billion later this year.

Governor Reynolds is correct in calling for lowering both the individual and corporate income tax rates. Reducing corporate taxes are often mistakenly viewed as “tax cuts for the rich,” but high corporate rates impact jobs and productivity. In addition, high corporate tax rates are passed onto consumers. Having a lower corporate tax will also encourage more economic growth.

Taxes on income, whether individual or corporate, are the most harmful for economic growth. Income taxes punish work, investment, savings, and productivity. Tax rates have a significant influence on the economic decisions individuals and businesses make on a regular basis. Both lose incentive to work if their earnings are consumed by taxes.

A major lesson from the federal census demonstrates that an exodus is taking place as people are leaving high tax states. A significant economic challenge for Iowa is the need for more workers and a lower tax climate will help attract new residents.

This is especially true as more Americans, both workers and employers, take advantage of remote work or who are looking to escape the plethora of problems plaguing many cities across the nation. “The ongoing migration from high- to low-tax states, and particularly states with low income taxes, is likely to accelerate with the growing viability of telework,” argues Timothy Vermeer, a Senior Policy Analyst with the Tax Foundation.

This year has the potential to be a record setting year for state tax reform across the nation. Currently 30 states are considering some form of tax relief and or reform. These are not just Republican “red” states, but also Democrat “blue” states. In 2021, 15 states enacted tax reforms.

Governor Reynolds in her Condition of the State address made a crucial point when she noted that her tax reform plan rewards work. “All of these tax cuts have one thing in common—they reward work. Work to be done and a lifetime of work to be proud of,” stated Governor Reynolds.

Tax reform is about rewarding work, allowing individuals and businesses to keep their hard-earned income, and in return that creates a stronger and economically competitive Iowa. Governor Reynolds stated that allowing taxpayers to keep more of their income will result in more dollars being “spent every single day on Main Streets, in grocery stores, and at restaurants across Iowa. We’ll see it spent in businesses instead of on bureaucracies.”

Governor Reynolds, along with the Iowa House and Senate, have each introduced tax reform bills that will make Iowa more competitive. Iowa is demonstrating that prudent budgeting along with responsible tax reform is creating a more competitive economy, while unleashing opportunities.

With workforce still down, Delaware restaurants at ‘most vulnerable’

From: Delaware Business Times

WILMINGTON — For nearly two years, Delaware’s restaurants have struggled to keep food on the table and in take-out boxes. But now, the Delaware Restaurant Association President and CEO Carrie Leishman thinks that unless something is done fast, the First State could see many eateries close their doors for good.

During the pandemic, Delaware’s restaurant industry lost more than $1.2 billion in sales, according to figures from the DRA and the state finance department. That number has not been updated since mid-May.

“Restaurants are at the most vulnerable point of recovery, where the workforce still hasn’t come back and many establishments are making slim to no profit,” Leishman said. “One restaurateur told me recently that we should expect to see more restaurants close, up and down the state, in the next 18 to 24 months.”

Nationally, the restaurant industry has yet to hire more than the 650,000 jobs lost in the early days of the pandemic. In Delaware, the hospitality industry has shed 4,300 jobs between December 2019 and December 2021.

Leishman and the DRA are campaigning for new measures to ideally boost the restaurant workforce in 2022, namely loosening labor laws for teenagers and the re-entry workforce as well as subsidizing benefit programs.

In Delaware, minors 16 and 17 years old cannot work more than 12 hours in a combination of school and work hours per day and must have an 8-hour period of no work and no school in between.

For those who are incarcerated, the Carney administration established a blueprint last year to create apprenticeship programs and work with Delaware Technical Community College to expand opportunities for human services. Later that year, the National Restaurant Association awarded Delaware funds to establish a Hospitality Opportunities for People (re)Entering Society (HOPES) program, which is a job skills program for formerly incarcerated people looking to work in the restaurant industry.

“We’re grateful for the ARPA money from Gov. Carney, and it’s the first step in recovering our workforce. But there’s more that needs to be done, whether it’s raising the number of apprenticeships for re-entry or disability issues. There’re systemic issues at work here, and it’s just one more obstacle that restaurants have to overcome,” Leishman said.

A new DRA report shows that against the backdrop of the national labor shortage, Delaware restaurants are facing hard challenges between inflation and shifting consumer patterns. Inflation continues to rise at a record-setting pace, and 83% of 200 Delaware restaurant operators surveyed reported costs were higher in 2021 compared to 2019. In the same time period, 68% of restaurants said sales volumes were lower.

“Inflation can eat up about 3% to 5% of your profit margins, and restaurants are already operating on razor thin margins,” Leishman said. “Prices are at the highest we’ve seen in 40 years, and customers value their dollar, especially since it doesn’t have enough buying power as it used to. Restaurants are competing with groceries, streaming services, and other entertainment — there has to be a breaking point somewhere.”

Compared to 2019, 68% of restaurants said sales volumes were lower in 2021. It’s a trend that’s echoed across the country. The Morning Consult, a global business intelligence company, reported that 68% of adults are not eating at restaurants as often as they would like, the highest it has been before the omicron variant disrupted life starting in November.

More than half of nationwide restaurant operators say it will be a year or more before business conditions return to normal, according to the DRA report.