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What’s New

Democratic lawmakers propose higher tax rates in Delaware

From Delaware Online

DOVER, Del. (AP) — Democratic lawmakers in Delaware are proposing several new tax brackets that would result in higher-income individuals paying more to the state’s coffers.

The current top tax rate in Delaware is 6.6% for taxable income exceeding $60,000.

A bill introduced Wednesday would apply the 6.6% rate to income between $60,000 and $125,000 and create a new rate of 7.1% for taxable income in excess of $125,000, up to $250,000.

Those with income between $250,000 and $500,000 would pay 7.85%, and a top rate of 8.6% would be established for Delawareans with taxable income of more than $500,000.

Co-sponsors of the measure include the state Senate president and several progressive Democrats who were elected in November.

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Delaware could exempt unemployment benefits from state taxes. How it would work

From Delaware Online

Delaware is considering exempting unemployment benefits that were paid in 2020 from state income taxes.

The proposal would be done through a bill that state lawmakers introduced on Monday with the support of Gov. John Carney.

The bill would also waive the 13-week waiting period before the state could “trigger on” to pay extended unemployment benefits in periods of high unemployment.

The proposal comes after more than 160,000 people filed for unemployment last year as a result of businesses shutting down temporarily or permanently due to Carney’s state of emergency orders to slow the spread of COVID-19.

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New advisory group aims to push Del. innovation economy

From Delaware Business Times

WILMINGTON – A new state advisory group intends to increase Delaware’s spotlight as a science and technology innovation hub, helping the state remain competitive in the region for growing and relocating companies.

The Science & Tech Advisors Group, announced Dec. 30, consists of representatives from Delaware’s top tech companies, industry organizations, institutions of higher education and state government. It will be chaired by Patrick Callahan, co-founder of the Delaware Data Innovation Lab and CEO of Wilmington data analytics firm CompassRed.

As the First State’s spotlight grows under an impending President Joe Biden, Callahan told Delaware Business Times that there is a “huge opportunity to really take this to the next level.” Organization of the new group that was sought by Delaware’s public-private economic development agency, the Delaware Prosperity Partnership, took several months behind the scenes in 2020, but it has been a goal for Gov. John Carney since he announced his transition plan four years ago.

Callahan credited J. Michael Bowman, state director of the Small Business Development Corp. and chairman and president of the Delaware Technology Park, an innovation hub near the University of Delaware, for setting the foundation that the group hopes to build on. With startups growing rapidly, an established group of big-name companies and fertile training grounds at UD and Delaware State University, Callahan said that Delaware is poised to benefit.

“I hate to say this, but the pandemic sort of brings an eye toward the need for this type of industry in our region,” he said. “It seems like it’s the perfect timing for all this to really take off.”

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Will Delawareans be welcomed in the 2021 Legislative Session?

Delawareans take a lot of pride in our little state, and so do we at A Better Delaware. That is why we are working to improve the state for every Delawarean, and for our future. The 2021 Legislative Sessions begins on Tuesday, January 12, and we will continue to advocate for you and your businesses throughout Session.

Currently, our representatives and leaders are not working to truly improve Delaware, and Delawareans are tired of seeing their state suffer because of it. Now is the time to critically think about the decisions that have been made in Dover, who is making them, and why. The 2021 Legislative Session could be the one to solidify the poor national standings A Better Delaware frequently reports on. It may push us further down the path of mediocrity, or could be the one that makes a decisive change that puts the First State back on top.

One such issue is that Delaware state government tends to minimize or even diminish the role of the citizen in decision-making, to the detriment of its constituency. Without transparency and accountability to influence better decisions, our officials are free to pass legislation to their own benefit, instead of that of its people.

The transparency issue with Delaware state government has been clear each time a bill is held until the last minute, or rules are suspended to bring forward a bill that was not on the agenda. Information is frequently withheld from constituents and stakeholders.

Transparency and the resulting ability to hold elected officials accountable have long been major issues in Delaware government with implications that span policy, spending, and public faith in government, but access should be easier than ever with virtual meetings and digital communication.

Evidence shows that government secrecy can lead to a lack of accountability and abuse of power, and when a local government isn’t forthcoming, it weakens the trust between the officials and their constituents.

Weakened public trust in government can lead to citizens and businesses becoming more risk-averse and delaying investment, innovation and employment decisions that impact economic growth and development. Establishing and focusing on transparency is an investment in economic recovery the future of the state.

Delawareans were teased with the promise change one year ago, when Delaware General Assembly leaders Sen. McBride and Rep. Schwartzkopf announced a new rule which made June 10, 2020 the last day that House or Senate committees could consider bills that originate in their respective chambers. In May, Rep. Schwartzkopf doubled-down on the promise, by asserting the General Assembly would “concentrate on the money bills,” and that anything beyond would need to be refiled in the start of this upcoming legislative session.

Legislators quickly went back on their word when session resumed virtually.

The purpose of the rule was to encourage public involvement and prevent bills from being rushed through at the end of session.

“The public isn’t fully aware of what we’re doing,’ President Pro Tempore, Senator David McBride said. ‘It’s not that we’re trying to do it without their knowledge. It’s just that things come up.”

Why, in the digital age, won’t our legislators communicate to the public upcoming bills that impact the state’s residents and businesses? What is the reluctance for legislators to hold themselves accountable, or continue to keep the state in the dark?

Voters need to speak out against legislation that is detrimental to their families, communities, businesses, or finances, but must be aware of upcoming bills to do so. In order to do better, our lawmakers must act better. As we approach the 151st General Assembly, it is important to advocate for change by advocating for transparency and accountability in our state government.

Stay up to date on important issues and how to take a stand during this Session by keeping up with our social media, emails, blog, and VoterVoice platform.

Minimum Wage Hikes Kick in Across the Country—at the Worst Possible Time for Small Businesses

From the Foundation for Economic Education

2020 was one of the worst years in modern American history for small businesses. And now, thanks to a wave of minimum wage legislation that kicked in on January 1, things are about to get even worse.

Make no mistake: small business owners are already seriously hurting.

When state and local governments responded to the outbreak of COVID-19 in the spring with harsh lockdowns and restrictions, businesses were forced to shutter. Many in the restaurant and hospitality industry remain shut down many months later, or were briefly allowed to reopen then shut down again this fall. Meanwhile, much of the taxpayer-financed aid meant to help these businesses was instead captured by big corporations or lost to fraud and waste.

To add insult to injury, thousands of small businesses were vandalized and looted during the summer unrest after the death of George Floyd. (No, insurance doesn’t eliminate the harm).

At least 100,000 small businesses that were forced to close in 2020 will not reopen, according to Yelp. In a recent survey, almost 60 percent of small business owners said that they don’t expect their enterprise to survive through June 2021.

Many of these same small businesses teetering on the brink of collapse are about to get slapped in the face with surging labor costs. A total of 20 states had minimum wage hikes take effect this month as part of scheduled ramp-ups.

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Happy New Year!

As the new year approaches, many of us are thinking of ways we can change for the better and making resolutions for 2021. We want to know: is Delaware government and leadership doing the same? If the past any indication, it is unlikely to expect any self-reflection with budgeting, policy, or many other items. Here at A Better Delaware, we decided to make a 2021 resolution list for them:

Improved Transparency and Accountability

Delaware state government tends to minimize or even diminish the role of the citizen in decision-making, to the detriment of its constituency. Without transparency and accountability to influence better decisions, our officials are free to pass legislation to their own benefit, instead of that of its people.

A better way: allow for maximum transparency by livestreaming the session, allow public access to session, file bills publicly with ample time for public and official review, and no longer pass important pieces of legislation overnight on the final day of session.

End Corporate Welfare

Delaware’s game of corporate welfare is “a hell of an expensive lesson picking winners and losers,” and Delawareans are clearly the losers. Bloom, Fisker, and Solenis are just a few examples of expensive failures when it comes to big money for companies on the Delaware taxpayer’s dime.

A better way: Delaware lawmakers and leadership should reconsider their past failings and learn from their mistakes when approaching economic development via corporate incentives. After all, the definition of insanity is doing the same thing over and over again and expecting a different result. Instead, we must attract businesses by having a better business climate with lower taxes and less regulation.

Be kinder to business

According to the 2021 State Business Tax Climate Index from the Tax Foundation, Delaware is ranked 50th in the nation for corporate taxes. Unfortunately, Delaware is no longer the business haven it once was. Factor in the sub-par help offered to struggling small businesses statewide during COVID and proposed measures like minimum wage and other employer mandates set to come up in the 2021 Legislative Session, and one could assume the goal is to force our businesses out of business.  In 2021, lawmakers must do better.

A better way: now is not the time to add any additional burden to small and local businesses that are still trying to stay afloat or recover from the pandemic. Instead, we should find ways to support them and boost employment.

Sunset the Health Resource Board (Certificate-of-Need)

Delaware is one of 35 states with Certificate-of-Need (CON) laws, in the form of its Health Resource Board. Despite a federal recommendation of repeal in 1986, the First State has kept this entity that raises health care costs and limits access to care. Without this Board, Delawareans could save $270 on average, have more local health care services, and be healthier overall.

A better way: It’s time for the legislature to sunset the Health Resource Board/CON. Delaware’s health indicators are mostly troubling, and COVID-19 has highlighted many shortcomings and demand for health care, which have been held back by the CON laws for the past 30 years.

Reform Taxes and Spending

With a projected $500M surplus, there should be no tax increases after the upcoming property tax reassessment. Our state budget (General Fund, Grant in Aid, and Bond) should not establish new spending, especially due to this revenue mostly being one-time funding. The last $200M “surplus” was the exact amount of additional revenue brought in by new tax increases implemented in 2017, and is responsible for some of the new surplus as well.

A better way: replenish the Budget Smoothing Fund and increase the Rainy Day Fund to prepare for the next statewide hardship. Additionally, it is imperative to pay down the massive pension deficit Delaware has. We can use this reassessment and new revenue to reduce our real estate transfer tax, which is currently the highest in the nation.

This may be a relatively short list in comparison to the many issues we at A Better Delaware see in the First State, but we will continue to tackle every issue that falls under our platform in 2021. We hope you’ll join us.

Our resolution is simple: continue to do what we can to fight for Delaware taxpayers and businesses and make Delaware a better place to live, work, and start or own a business. Happy New Year! We look forward to advocating for and with you in 2021.

Why is the state so out of touch from what its own residents are going through?

There is little public attendance or media coverage of public budget hearings that deal with billions of taxpayer dollars. Public involvement is severely missed in this process. Delawareans are simply presented the Governor’s proposed budget in January, after many hearings and proposals are done and considered.

The Governor holds a significant amount of power in the process, which results in a near-complete state budget before the Joint Finance Committee hearings even begin in February. Due to the lack of attendance at the initial budget request hearings, February would essentially be the public’s first say in the process (through their elected officials on the JFC). However, the JFC does not have as much say as you might imagine, with pre-allocated funds for schools, government agencies and more.

In a bid to enhance the transparency of this process and to hold not only the Governor, but the agencies presenting budgets accountable, A Better Delaware has summarized what was delivered in the recent budget request “public hearings,” below.

Strikingly, there was clear disregard and complete lack of sensitivity to what many Delaware businesses, households, and residents have been through during COVID-19. While businesses were forced to reduce their operations or even close down—costing revenues, jobs, and even life’s work—Delaware agencies are presenting budget requests with 4%+, 9%+, and 18%+ increases over FY 2021 budgets.

Why is the state so out of touch from what its own residents are going through?

The Department of Agriculture submitted a budget request that was the same as FY 2021, stating:

 “This request is fiscally responsible while allowing our Department to fulfill its mission of serving our agricultural community and providing a wide array of consumer protection services for Delawareans.”

Unfortunately, other agencies operated as if the coronavirus was a hallucination, and moved forward with ever-increasing budget requests, despite a state revenue forecast that could change any day.

The Department of Justice requested a 3.49% increase to hire dozens of new attorneys and staff. How much funding and how many attorneys are going towards the numerous out-of-state affirmative litigation cases that Delaware has joined in on recently? Meanwhile, workers in Delaware across various industries have lost their jobs due to COVID.

Delaware State University requested a 9.76% increase, much of which can be attributed to “campus improvements.” With DSU’s president now working for Biden and bringing in multimillion dollar donations, the request should be updated to show some fiscal responsibility and remove the burden of this massive budget increase from the state’s taxpayers.

Perhaps the most alarming is the unabashed 18.75% increase requested by DELDOT. Despite continuing with full funding during the pandemic, the agency has presented the largest budget increase in the state, totaling an additional $62.1M in taxpayer dollars. DELDOT was able to keep their full budget, receive federal CARES Act funding, and is now asking for a budget increase on top of that. Meanwhile, our restaurants, hotels, retailers, and more are losing capacity, revenues, staff, and even shutting down—with limited assistance offered to prevent this.

Delaware taxpayers turning a blind eye to the budget formation process has unwittingly enabled state leaders to abandon the concept of fiscal responsibility when it comes their money.

Minnesota and New Mexico have been examining better government spending through a partnership with the Pew-MacArthur Results First Initiative, where policymakers look at the effectiveness and return on investment of programs to determine where to allocate taxpayers dollars. For example, Minnesota agencies were asked to provide evidence of desired outcomes along with their budget request for each program. This was not present in many Delaware agency presentations.

It’s time for Delaware lawmakers and our Governor to actually address the ever-growing budget by instituting a policy of data-based spending. Agencies can use existing funds more efficiently, invest in programs that improve life for the state’s residents, provide more economic opportunity, and show that they can operate by normal budgeting standards that businesses and individuals already do. There have been efforts to fix this here before, but they have failed.

The Government Accountability Act, a bipartisan bill that never made it to a vote, would have made the annual budget process part of a “performance management system of strategic planning, performance metrics and performance budgeting,” that would make State government more efficient, reduce costs, and eliminate waste in the process and operations executed by the state.

Another bill that never made it to a committee hearing would have implemented a mandatory window to wait before voting on any budget bill, in order to allow for adequate evaluation and discussion before being pushed through. While not bipartisan, this bill would have forced lawmakers to actually read the budget before voting to pass it.

The time to do better and be better is now.

Delaware can’t brew expansion

Delaware has almost one dozen craft breweries and brewpubs, some with multiple locations statewide, but the industry could be growing more than is currently allowed. In what sems to be another arbitrary thing on our books, Delaware law prevents these establishments from expanding beyond three locations in the state.

In September 2019, the popular Iron Hill Brewery grew their business 20 miles over state lines in Exton, PA due to this restriction. Iron Hill wanted to expand in Delaware, but simply couldn’t, pushing them to take their business—and the jobs it created—across state lines.

“It puts an unnecessary burden on these companies that are trying to expand and create jobs here in Delaware,” said State Representative Bryan Shupe, “We’re hindering their ability to compete.”

Representative Shupe sponsored a bill in 2019 that would have eliminated this limit on brewpubs, though it never made it out of committee. A new version of the bill is expected in 2021, and the hard lesson from Iron Hill should push lawmakers to reconsider the measure in a bipartisan manner.

Not only does the current limitation hurt small businesses, but stalls the growth in jobs that they could provide. After the major hit to our labor market from COVID-19, anything that hurts job creation should be heavily considered, and at minimum given a chance to be heard, unlike in 2019.

Our local businesses are struggling to stay afloat. Many brewpubs are a part of the restaurant industry, which has been hit particularly hard by the pandemic. Nationally, the restaurant sector had already lost $120 billion in sales by May, only 2 months after the initial restrictions were enacted. In Delaware, Governor Carney’s new COVID-19 restrictions limiting restaurant capacity to 30% went into effect on November 23.

These businesses cannot survive on takeout alone, which may soon be the case. The 100% costs of staying open aren’t covered by the 30% of sales they are able to bring in. According to the Delaware Restaurant Association, up to 30 percent of Delaware restaurants could close if they do not receive assistance.

This is stacked on top of the struggle of being locked in place by the current Delaware Code.

“You have to pick three locations that have the best opportunity to grow your business and make money. These smaller communities without brewpubs, I don’t think they are going to see them,” Harry Metcalfe, co-owner of Revelation Craft Brewing Company said.

The brewpub restriction is only one example of the burdensome regulatory code that exists in Delaware. These regulations hurt all types of businesses statewide and are rarely reviewed or changed.

As of last year, Delaware’s regulations included 104,562 restrictions, 6.7 million words, and would take 9 weeks to read through—and all of this is in addition to federal regulations. For a small state, that’s quite a regulatory burden.

Delaware ranked 42nd for its regulatory environment and 37th for economic environment pre-COVID. Our lawmakers should be working to serve those they were elected to represent by addressing the job killing regulations. The brewpub bill is a good place to start, but is hopefully one of many steps in a process to truly better our state.

The Restaurant Industry: The Other COVID Fatality

You’re hearing it everywhere: this pandemic has really hurt small and local businesses. Perhaps one of the most impacted by COVID-19 restrictions has been the restaurant industry. Restaurants typically have extremely small profit margins, meaning any hit to their operations could spell disaster.

Nationally, the restaurant sector had already lost $120 billion in sales by May, only 2 months after the initial restrictions were enacted. The reach of this loss must be understood; a blow to this industry kills a large percentage of jobs, and hurts other businesses from florists, to food packagers, to liquor salesmen, and more.

The situation for restauranteurs is dire: Yelp reported that by May, 53% of the restaurants on their platform were now permanently closed, while OpenTable said one in four were at risk of foreclosure. These numbers were when other options, like outdoor dining, were available. As we move into the winter months, it is difficult to grasp the impact this may have.

Governor Carney’s new COVID-19 restrictions limiting restaurant capacity to 30% went into effect on November 23. This new Executive Order will further cripple an entire industry that has been struggling—and failing—due to similar orders for eight months.

These businesses cannot survive on takeout alone, which may soon be the case. The 100% costs of staying open aren’t covered by the 30% of sales they are able to bring in. For many, this year was the one in which their business, livelihood, and dreams shut down forever. According to the Delaware Restaurant Association, up to 30 percent of restaurants could close if they do not receive assistance.

If only 1.44% of Delaware’s positive COVID cases in November visited a bar, and 4.63% a restaurant, why are we targeting this industry?

The Delaware Restaurant Association reports close to 2,000 eating and drinking locations in the state, which provide around 50,000 jobs and $2 billion in sales. This sector is the largest small business employer in Delaware. Carrie Leishman, President of the Delaware Restaurant Association, estimates thousands of workers losing their jobs around the holidays due to the new limit.

Meanwhile, retail and other industries have operated without issue, despite being a major catalyst for public crowds. Black Friday produced a packed crowd at the Christiana Mall, even in the food court. The absolutely arbitrary parameters of what has made a business “essential” is precisely what is killing this massive industry nationwide.

Delaware’s economy cannot shoulder this burden. Pre-pandemic, we were ranked 34th for employment and one of the worst states for small business. Now we face hundreds or thousands more jobs on the chopping block with less unemployment assistance from the state than before. The Delaware restaurant industry has received about $25 million in state assistance so far, and anticipates $25 million more. Unfortunately, it may not be enough to counter the restrictions.

Add in the newly drafted minimum wage bill and other costly proposed employer mandates that are likely to be brought forth for a vote in the 2021 Legislative Session, and our restaurants—and the jobs that they offer—may never recover. It is far past time to take action and save livelihoods, not just lives.

Restaurateurs raise heat over increased restrictions

From Delaware Business Times

WILMINGTON — As Gov. John Carney rolled back indoor dining back to Phase 1 requirements of 30% of indoor capacity to slow the spread of COVID-19, Delaware’s restaurant industry faces difficult decisions this winter amid an estimated $900 million loss through the pandemic.

“Look, it means that full-service restaurants that rely on that in-person dining experience will be hit hard,” Xavier Teixido, owner of Harry’s Hospitality Group, told the Delaware Business Times. “You cannot make money at 30% capacity. The No. 1 decision restaurants are going to face is the value in staying open with staff there to serve 30% of the guests that were allowed versus the hit in closing restaurants.”

Gianmarco Martuscelli, owner of Klondike Kate’s in Newark and La Casa Pasta in Glasgow, said the industry was “disappointed” by the renewed restrictions. Martuscelli, who serves as treasurer for the Delaware Restaurant Association board, said that owners had hoped for a curfew, like Maryland has instituted, rather than reduced capacity because it would allow them to retain more of their dinner business. Now, however, some owners are deciding whether to scrap indoor dining altogether and return to curbside takeout only, he said.

Since June, Delaware has been operating in Phase 2, allowing 60% capacity of fire code capacity in restaurants although bar seating was restricted in many Sussex County beach communities in the height of summer. Carney eased those restrictions on beach bars in September — allowing patrons in if they reserved a seat and ordered food — and lifted them entirely this month ahead of winter.

Lisa DiFebo-Osias, owner of DiFebo’s Restaurants in Bethany and Rehoboth beaches, said her anger comes when she walks into a store and sees employees without masks on because they did not want to wear them. In comparison, the DiFebo’s staff works eight-hour shifts while wearing N95 masks without taking them off once.

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