A last ditch effort to adjust personal income tax brackets dies in committee just days before lawmakers wrap up in Dover for the year, but two large fee increase packages for state agencies head to Gov. Matt Meyer for signature.
State Rep. Sean Lynn (D-Dover) introduced a third version of his bill to alter personal income tax brackets on Tuesday, which was immediately heard in the House Revenue and Finance Committee the next day.
Rep. Lynn initially introduced a version of the bill in April to mirror the proposal Gov. Matt Meyer announced in his recommended budget presentation the month prior, which included three new tax brackets at the $125,000, $250,000 and $500,000 threshold.
Currently, the floor for Delaware’s highest bracket is $60,000, which is taxed at a rate of 6.6%.
Under Gov. Meyer's proposal, the $125,000-$250,000 income group would be taxed at 6.75%, $250,000-$500,000 would be taxed at 6.85% and $500,000 and above would be taxed at 6.95%.
Gov. Meyer's initiative was an effort to raise more revenue for the state after economic leaders known as the Delaware Economic and Financial Advisory Council (DEFAC) warned state leaders a deficit of over $450 million is possible by fiscal year 28 if spending growth continues to outpace income growth.
But Democratic leadership announced earlier this month that it would no longer be pursuing the tax bracket changes this legislative session.
Their decision came after DEFAC announced an additional $98 million for lawmakers to work with for next year’s budget.
Despite a better-than-expected economic forecast, Rep. Lynn believes relief for low-income Delawareans should still be a priority, and he modified Gov. Meyer’s tax bracket proposal to do just that.
“It's not designed to generate revenue. We all believe that it would be in poor taste, given recent DEFAC projections, to introduce a bill that generates revenue. This bill is solely designed to give relief for 90% or more of Delawareans who are currently struggling," Rep. Lynn said.
His new proposal would have maintained the 6.6% tax rate for incomes between $60,000 and $150,000, but taxable income above $150,000 would have been taxed at higher rates.
The bill would have resulted in roughly $58 in relief for those who make below $60,000.
No Republicans present at the committee hearing supported the measure, arguing the changes would harm upper and middle class Delawareans, as well as small business owners.
"I fully appreciate what you're trying to do. I don't know that $58 per taxpayer is the right way to go," State Rep. Mike Smith (R-Pike Creek) said. "I also think of what it means to be middle class nowadays as well, and it's become way more expensive."
Several Democrats were absent from the committee hearing, but even after House Revenue and Finance Committee Chair Madinah Wilson-Anton (D-Newark) walked the bill for signatures, it failed to garner enough support.
Democratic leadership from both chambers previously stated they will be working throughout the summer to modernize Delaware's income tax code as part of a "broader effort to balance Delaware’s long-term fiscal stability while sustaining [its] investments in critical public services."
They said greater clarity on the federal budget's impact is expected this fall, when they will then assess whether additional revenue is needed.
The Delaware Senate also passed two fee package increases for the Delaware Department of Natural Resources and Environmental Control (DNREC) and the Delaware Department of Transportation (DelDOT).
DNREC’s fee package largely raises licensing and permitting fees for businesses — it does not raise the fees residents pay to enjoy outdoor activities like state park entrance fees or hunting and fishing permits.
The fee hikes would bring in over $7 million in revenue for the department — a $5.3 million increase.
That measure passed with no Republican support from members present.
The average resident will feel more direct impact from the DelDOT fee package, which creates new electric vehicle registration fees and raises various DMV fees.
State Sen. Marie Pinkney (D-Bear) says without the increases, DelDOT would have to cut funding to several programs, including the Community Transportation Fund (CTF).
That program provides a fixed amount of funds annually to lawmakers for transportation improvements within their district, something that helped sway a yes vote from State Sen. Eric Buckson (R-Dover).
"It's my belief under the the leadership of the new secretary of DelDOT, Secretary Hastings, and the direction we're heading in versus the forecast if we don't, and the things that are at risk — things that I enjoy helping benefit my communities with, CTF and all of those things, I think it's a just ask, even if it's going to be a sandwich I don't want to eat," Sen. Buckson said.
The new fees range from $15 to $900 depending on the weight of the vehicle or motorcycle and if it is electric, plug-in electric, non-plug-in electric or another fuel motor vehicle.
The bill would also create and increase several DMV fees, including a new replacement driver’s license fee of $20 and an increase in the driver’s license issuance and renewal fee from $40 to $50.
It would also raise the motor vehicle document fee — a charge assessed by car dealerships to cover the cost of processing paperwork and handling the vehicle's registration, title, and license plate transfer to the buyer — from 4.25% of the vehicle's purchase price to 5.25%.
In total, the new and increased fees are expected to bring in almost $39 million.
Sen. Buckson was the only Republican present to vote yes on the measure.
If the governor signs both bills, all increases go into effect late this year.
DelDOT also plans to implement toll increases on Route 1 at Biddles Plaza (Middletown) and Dover, on the I-95 toll, and the US301 State Line Toll.
Increases will range from $0.50 to $1.50.
