The General Assembly is reaffirming its role of levying taxes following a decision by the state’s premier business court.
House lawmakers passed a bill nearly unanimously Tuesday expressly forbidding most municipalities from taxing their residents without seeking approval from the legislature.
The bill was in part a response to a Court of Chancery decision last year in a suit between former U.S Senate candidate and business owner Alex Pires and the town of Dewey Beach.
Pires claimed the town’s business licensing fee is essentially a tax since it collects more than what is required to oversee the program. The court dismissed his claim.
The decision says municipalities can levy fees under the “all powers” clause in their charters regardless of their size. Pires is appealing the decision.
House Speaker Pete Schwartzkopf (D-Rehoboth Beach) says he didn’t want Dewey Beach to interpret the “all powers” clause as a free pass to do with what they will, but didn’t want to single them out by solely amending their charter.
“In hindsight, it would’ve been a hell of a lot easier, but it wouldn’t have been right because the same language from this court case that affects Dewey [Beach] affects other towns.”
He noted the town also tried to impose its own gross receipts tax in recent years, which he opposed being allowed without legislative consent.
“And in 2013 I went to them and told them in a town meeting, ‘You can’t do this unilaterally. You have got to come to the General Assembly,’ and they just basically said, ‘We’ve got lawyers that say we can do it, so go away,’” said Schwartzkopf.
Several cities strongly opposed the bill based on a requirement that fees be “reasonably related” to the cost of running the program, but that was amended out.
Certain cities like Wilmington with special charters dating back to 1966 are exempt from the bill and can levy a tax at any time.
The bill now heads to the Senate.
