What’s New
General Assembly will allow public to observe sessions for first time since onset of pandemic
From Delaware Business Now!: When the Delaware General Assembly reconvenes its session on Tuesday, members of the public can observe sessions in Legislative Hall in limited numbers for the first time since the onset of the Covid-19 pandemic.
For months, Republican legislators have been demanding the General Assembly resume normal operations, citing lower case numbers.
Republican-controlled legislatures around the nation have typically operated with fewer restrictions.
Legislative Hall has been closed to the public since March 2020 due to the global pandemic, which infected more than 10 percent of Delaware’s population and resulted in the deaths of more than 1,670 residents.
Lawmakers met virtually throughout 2020 and began the 151st General Assembly virtually before beginning a hybrid in-person session earlier this spring.
However, space constraints inside Delaware’s Legislative Hall – one of the smallest statehouses in the nation – have previously made the public’s safe return impossible given previous social distancing requirements, according to Democratic leaders of both houses.
Gov. Carney’s latest State of Emergency order, which reduced social distancing requirements from six feet to three feet, combined with nearly half of all eligible Delawareans are now fully vaccinated, will allow the House and Senate to provide limited public seating inside Legislative Hall on session days. Read more: Delaware Business Now
GOP bills seek to cut taxes
From :Bay to Bay News
DOVER — Republican-backed legislation awaiting action in the House of Representatives would cut taxes and provide tax credits to individuals.
Of the five bills, the most impactful and least likely to become law is House Bill 191. Sponsored by Rep. Rich Collins, R-Millsboro, the measure would cut taxes on personal income, gross business receipts and corporations.
Under the bill, each individual income tax bracket would be reduced by 10%. For instance, the lowest level, income between $2,000 and $5,001, would be taxed at 1.98%, instead of 2.2%, while the highest bracket, representing all income greater than $60,000, would go from 6.6% to 5.94%.
The corporate income tax would be slashed from 8.7% to 6.1%, and the gross receipts tax, which covers business revenue, would be sliced in half.
Though there is no analysis indicating the exact revenue impact of those changes yet, the House Republican caucus said it would save taxpayers more than $420 million a year. Read more here: https://baytobaynews.com/stories/gop-bills-seek-to-cut-taxes,49723
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:
- 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.” - 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.
- 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.
- 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