Delaware lawmakers file legislation to increase the state’s cigarette tax by $1.50 among other tobacco tax hikes.
With Delaware’s spending anticipated to outpace its revenue growth for years to come, state officials have been looking at ways to bring in more income with a looming budget deficit on the horizon.
Although Gov. Matt Meyer’s administration proposed adding additional personal income tax brackets for higher earners, House Speaker Melissa Minor-Brown (D-New Castle) says the General Assembly is still working on the right changes.
"I am 100% in support of increasing brackets when it comes to personal income tax. But what I want to do is make it clear that I don't just want to pass a bill that look good and feels good, it also has to do good, and we're just not there yet," Speaker Minor-Brown said.
Currently, the floor for Delaware’s highest bracket is $60,000, which is taxed at a rate of 6.6%
The proposal from Gov. Meyer, which was officially filed as a bill by State Rep. Sean Lynn (D-Dover), would have created three new brackets for those who make $125,000, $250,000 and $500,000 taxed at 6.75%, 6.85% and 6.95% respectively.
But Speaker Minor-Brown argues these increases would only shake out to be roughly $12 to $14 in relief per year for the state's lower earners.
"As someone who literally had to rely on state resources, who was extremely poor, who fell 200% below the federal poverty level, I don't think that that's enough relief. We can do better. So we need to come to the table. We can't rush this. Do we need to do something? Absolutely. Is it on the table? Absolutely. Are we going to do something? Absolutely. But we need to do it right, because we need to actually ensure that that relief is substantial," Speaker Minor-Brown said.
While that bill is no longer expected to make it through the legislature this session, lawmakers are tackling one of Meyer’s other proposals — a tobacco tax increase.
In his March budget address, Meyer recommended a 50 cent per pack increase, but lawmakers are proposing three times that amount, as well as raising the tax on other tobacco products from 30% to 45% of the wholesale price.
The per pack cigarette tax would increase from $2.10 to $3.60, which would put Delaware above Pennsylvania and New Jersey’s, which sit at $2.60 and $2.70 respectively, but keeps the state comparatively lower than the over $5 tax in Maryland and New York.
In addition to bringing in more revenue for the state, Speaker Minor-Brown says increasing the tax is a proven way to reduce tobacco use.
“When you increase tobacco tax, less people smoke. That is a fact. We've seen it happen in other states. We've even had the tobacco companies agree that when you increase tobacco tax, it reduces tobacco use, especially amongst our youth," she said.
According to the American Lung Association (AMA), high school tobacco use is the highest user demographic in the state at 18.3% while adult tobacco use is at 16.20%.
In recent years, the AMA has awarded Delaware an "A" in tobacco prevention and control program funding and for smoke-free air, but the state has been given an "F" in its tobacco tax structure for over a decade.
House Bill 215 would update the First State's structure to reflect the growing share that products like nicotine pouches and vapor products now occupy in the tobacco market.
It would also increase the vape product tax from 5 cents to 25 cents per milliliter and increase several licensing fees on the sales side.
While the changes could bring in millions of additional revenue for the state, some opponents argue tobacco tax increases are regressive.
But Speaker Melissa Minor-Brown says discouraging the use of tobacco products and reducing the state’s over $500 million spend on tobacco-related healthcare is something everyone should get behind.
“I don't see it as a regressive tax because who's going to pay for the health related impacts? We are, as a state, and we have to figure out how we're going to do that. So I think it definitely requires additional conversation, and not only poor people are smoking, so I just don't think we need to even think about it in that way," she said.
The bill has three weeks to make it through the legislature, and if signed into law, would take effect in September.
