Commentary: Tax cuts need to be seriously considered, as state finances improve

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Due to a resurgent economy and COVID-19 aid from the federal government, the finances of the state of Delaware have never been better.

Even after accounting for growth in the new operating budget, a capital budget that is expected to be the largest in state history and setting aside a large amount of cash in a reserve account, there are still opportunities to share this good fortune with Delawareans.

The state finds itself in an unusually good position. According to the Delaware Economic and Financial Advisory Council, the amount of money available for appropriation increased by $429.3 million over the last two months. This continues a trend. The state’s revenue estimate has climbed by more than $953 million since October or more than 20% of the governor’s proposed fiscal year 2022 general fund operating budget.

Officials are planning to use a portion of the additional money to prepare for potential future shortfalls, setting aside nearly $844 million as a hedge against an emergency or economic downturn.

The latest projections indicate that state revenue is anticipated to remain strong. In the current fiscal year, state revenues are expected to be $5.259 billion. Even with the economy expected to slow after the recovery, revenue projections for the next two fiscal years should remain well above $5.1 billion.

These figures do not include the $1.025 billion Delaware has received via the federal American Rescue Plan Act of 2021 but which has not yet been appropriated, as state officials await rules from the U.S. Treasury Department.

There are several pending measures seeking to share a portion of the state’s wealth in the form of tax cuts. I am supporting the following proposals as a co-sponsor.

State Rep. Lyndon Yearick, R-Magnolia, is sponsoring two bills, both benefiting lower-income Delawareans. The first, House Bill 172, seeks to temporarily eliminate the state’s portion of the realty transfer tax for certain first-time homebuyers. The bill would apply to people with a gross income of less than $45,000 for single buyers or less than $75,000 in combined income for joint purchasers. The purchase price of the home would need to be $250,000 or less. The bill would expire at the end of 2022.

Rep. Yearick’s second bill, House Bill 158, would establish the Delaware resident low-income tax credit. This act seeks to create a $500 tax credit for low-income Delawareans or $1,000 for spouses filing jointly. Additionally, a $110 personal tax credit currently available to eligible low-income Delawareans would be increased to $500.

Under the proposal, if the value of the credit exceeded the tax owed by the individual, he or she would receive the remaining value in the form of a tax refund.

When the state faced a budget deficit in 2017, lawmakers enacted laws increasing the tax burdens on seniors and homebuyers. State Rep. Mike Ramone, R-Newark, has introduced bills to repeal both.

House Bill 108 would restore the $500 senior real-property tax credit. Four years ago, the credit was cut to $400. A fiscal note completed last year reveals that the bill would return about $4.4 million annually to qualifying Delaware seniors.

Rep. Ramone’s second proposal, House Bill 71, would decrease the realty transfer tax in Delaware by 25%. In 2017, the tax was effectively raised from 3% of the purchase price of a property to 4%. (Local governments are responsible for three-eighths of this total, with the state accounting for the remainder.) This bill would reset the state’s take to its pre-Aug. 1, 2017, level, restoring the effective combined realty transfer tax to 3%. When fully implemented, HB 71 would allow homebuyers to collectively keep an estimated $83 million.

Under the last proposal, House Bill 214, local school districts could choose to eliminate the property tax liability imposed on any veteran with a 100% disability rating. The districts would be compensated for the relinquished revenue via a state fund established by the measure.

When times are tough, state lawmakers face difficult decisions, as they try to maintain state services. When times are good, I believe the state should share its abundance with the citizens it serves, responsibly reducing the tax burden. All five of these measures should be released from the House committees in which they are pending action, so they can be considered by all state lawmakers before the end of this session.

Rep. Jesse Vanderwende is a Bridgeville Republican.

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