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Unfunded DowDuPont incentives prompt tax hike talk in Dover


Gov. Jack Markell (D) and state lawmakers have widely lauded an incentive package as part of an effort to retain DuPont jobs in Delaware, but they are largely ignoring the bill that comes with it, totaling tens of millions of dollars.

Markell’s proposed budget for next year covers the initial $8.2 million hit expected in 2017 when they lowered corporate taxes in January. 

However, Finance Secretary Tom Cook says there is no current legislation in the pipeline to cover an expected $54.6 million tab that’s either lost through lower business taxes or spent on a handful of tax credits during the next two years.

“I think it’s obviously going to create some tough decisions. I still agree that that was the right thing to do, but it is going to make resources limited in the future,” Cook said.

“We’re cutting ourselves off at the knee after fiscal year 2017,” said Rep. Paul Baumbach, a Newark Democrat who has spoken out against the spending on credit approach the Markell administration has taken.

Baumbach says the organic economic growth from this package won’t cover the drop in revenue.

“I think that the magnitude is much smaller than what’s hoped for. I use the phrase that this is sort of a ‘pray and spend approach’ and I don’t think that’s responsible.”

He voted for what’s been called the ‘Delaware Competes Act,’ which modified the way the state calculates corporate income tax. It also changed which times of the year small business owners have to pay those taxes.

But Baumbach didn’t cast a vote either for or against a bill that sailed through both chambers last week, revamping or reviving two separate tax credits that incentivizes research and development or for bringing high salary jobs to Delaware.

Perennial budget pressures like more people signing up for Medicaid, miscalculations in projecting public school enrollment and ballooning state employee healthcare costs have racked up steep bills themselves in recent years and will be competing with the unfunded incentive package for those dollars.

Sen. Bryan Townsend (D-Newark) also registered concern with a lack of comprehensive action on a set of recommendations from a much-hailed task force that focused on lowering Delaware’s reliance on certain income steams.

“These are important changes,” said Townsend. “These are actually common sense changes, but why are we waiting until economic danger is here to make these kinds of changes?”

A bill ready to be put on the House agenda would raise the ceiling on the state’s corporate franchise tax, something Baumbach and Townsend both say should be looked at, though no department has done a financial analysis on how much money it would raised.

Despite being seriously considered as an option while leaders of all four caucuses forged a late night deal on transportation funding June 30 last year, it seemingly has little chance of passage now.

Senate Minority Whip Greg Lavelle (R-Sharpley) says his caucus has given no consideration to doing so.

“I could argue for a tax cut in [fiscal year 2021] saying the economy is going to be so strong, then we should cut taxes now. Like it or not, the reality is we do these things one year at a time and so that’s how we’re going to do it,” Lavelle said.

Senate Republicans broke up a Democratic super majority in that chamber in 2014, which allowed them to block any proposed tax or fee increases with just one vote.

Lavelle says he doesn’t expect the budget process to become more inclusive over the next three months, allowing lawmakers to punt the issue into 2017 and an entirely new General Assembly.

“The process seems to be on a track that will get [Markell] and the chambers out of here without too much rigmarole and those decisions can always be revisited next year and will likely have to be.”

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