By Dave Burris
Recently, state Rep. John Kowalko, D-Newark, and others introduced legislation (once again) to raise taxes on Delaware’s highest earners, a crusade of self-styled “progressive” legislators for many years. They decry as “unfair” the current state income tax system, whereby all income over $60,000 is taxed at 6.6%. Someone will need to help me understand how it is unfair when one person earns $50,000 and pays $2,388 in taxes, and another person earns $500,000 and pays $31,984 in taxes. The higher earner pays significantly more in taxes and pays a higher percentage of their income, which is the literal definition of a progressive tax structure.
I’m not here to defend high earners or to pretend that they’ll be massively burdened by this proposal. I get it that redistribution is a key tenet of modern-day progressivism, and I know Democrats were elected to a supermajority in the Delaware legislature and have the power to raise taxes unopposed. But let’s be clear what this is: a ploy to bring more money into government to be spent by legislators.
They have massive new government programs they want to institute, which aligns with their worldview that government is how we as a society come together to fix things. They believe we can solve all societal problems through government programs. This is a legitimate public policy framework, just not one that I agree with, given what I’ve seen.
Stabilization fund ‘saved our bacon’
Delaware is already a big spender, seventh in the nation in combined state and local government spending per capita. And as Gov. John Carney has noted, we don’t have a fiscal crisis from COVID-19. We don’t need to raise taxes. This is due almost entirely to the creation of the Budget Stabilization Fund, which the governor and legislators from both parties have openly credited with saving our state budget in 2020.
It’s worth noting that Rep. Kowalko and his fellow “progressives” opposed the creation of the fund and the principle of smoothing out the budget. 2020 proved them to be 100% wrong. Due to Gov. Carney’s insistence on creating the fund, important government services for the less fortunate were preserved and state employee wages were not cut when COVID-19 hit. In 2009, without budget stabilization in place, a $900 million shortfall had to be closed with tax increases and massive cuts.
Budget stabilization worked. The evidence is ironclad.
Former state Treasurer Ken Simpler was the visionary behind bringing budget stabilization to Delaware, and he deserves a large share of the credit. As part of that process, I watched Simpler, as well as Democrats including Secretary of Finance Rick Geisenberger and former state budget director Mike Jackson, flesh out the idea and build stakeholder consensus. And I watched as the “progressive” legislators stomped on the idea, only to have Gov. Carney resurrect it voluntarily — and save our bacon in the process.
During his term, Simpler spoke often about another key principle missing from our conversation around taxes and spending — the principle of value. He argued that the level of taxes and spending are policy choices, but that value should always be paramount. If we want to be first in the nation in public school spending, our elected representatives could do so and expect to have the best schools in the land. Or if we want to have the lowest taxes in the nation, we could do so, but we shouldn’t expect our government services to be very good.
That said, if we’re funding world-class outcomes, but we’re producing middling results, something is terribly wrong. Or in a real-world example, if we’re third in health care spending, but 31st in results, something is terribly wrong. The same can be applied to education, prisons and many other areas of state government. We don’t get our money’s worth. And performance and results have to matter. Increasing tax revenue before the necessary reforms are made simply enables the current systemic problems to fester. One could argue that taking more money from people when you’re doing so poorly with the money you have is a much better definition of “unfair” than what’s being offered by these “progressives.”
Constitutional amendment
That said, there is one scenario under which increased tax rates would offer less risk — a constitutional amendment to make the budget-stabilization process permanent. Gov. Carney is to be applauded for his insistence on adhering to the principles of budget stabilization, despite the opposition of many in his party. But let’s be honest. If we cast our gaze to the horizon and look at the potential candidates for governor in 2024, there isn’t one Democrat who can be counted on to stay on Carney’s path.
Because of this, we need to enshrine one key principle in our state constitution — we will limit spending in good times to save enough to make it through the bad times.
A constitutional amendment will need to pass two consecutive sessions of the General Assembly to take effect. Therefore, the bill will need to pass in 2021 or 2022 and then again in 2023 or 2024. With Gov. Carney’s reelection and dedication to the budget-stabilization principle, we have a four-year window in which to achieve this goal.
A constitutional amendment making the current policy of budget stabilization permanent is the single best thing Delaware can do to ensure a consistent, predictable government for the coming decades. I am not optimistic, however, due largely to the Republican Party’s stupid decision to hitch their wagon to Donald Trump, and Democrats control both houses of the state legislature with large margins, as well as every statewide office.
So I guess writing this is less of a “call to action” and more like burying a time capsule, so I can come back later and say, “Told you so.”
But hey, one can hope they’ll see the clear evidence and do the right thing.
Dave Burris of Lewes is a former Republican chief of staff in the Delaware Senate.
