Carney’s Shared Sacrifice

Gov. John Carney will unveil his budge plan this afternoon in an address in Dover.  He and the General Assembly face a $385.6 million budget gap.   From the News Journal:

While Carney and his administration have been tight-lipped about the specifics of his budget, the governor has said it will require “shared sacrifice” throughout the state and has called for a “budget reset” that will put the state on more solid, long-term financial footing.  The governor has spent the past few months attending legislators’ constituent meetings up and down the state, talking with citizens about what they want to see in his budget.

That shared sacrifice must include sacrifice among the wealthiest Delawareans and corporations.  And they must sacrifice first, before the poor, elderly, sick and the middle class.

Governor Markell submitted his budget blue print before leaving office in January when the state was facing a lesser $350M shortfall.  Here is what Cassandra found in analyzing that budget plan then:

Tax increases:

• Itemized deductions on personal income tax would be completely eliminated, but the standard deduction would be increased 50 percent. Raises $18.1 million.
• Top personal income tax rate increases from 6.6 percent to 6.8 percent, at $60,000. Raises $9.9 million.
• Raise eligibility to age 65 for pension deduction and extra tax credits.  Eligible age is 60 right now.  No new revenues are anticipated for next year, but would save the State $18M in out years.
• Corporate Franchise Tax: raised to match inflation, with a new new top rate —  $250,000 for companies with $750 million or more in revenues or assets. Raises $115 million.
• Cigarette tax increases from $1.60 a pack to $2.60 a pack. Raises $18.6 million.
• Realty transfer tax would increase from 1.5 percent to 2.5 percent. Raises $44 million.
• State cuts the share of the realty transfer tax that goes to counties by 50% to 0.25 percent.  Raises $11M (and puts an $11M hole in county budgets).

Some Spending Cuts:

• State employees pay more for health care. Now all State Plans would have a deductible, and existing deductibles would increase. Saves $24 million.
• The subsidy that pays up to $500 of senior citizens’ property tax bills would be eliminated.  Saves $25 million.
• All State department budgets would be cut.  Saves $56 million all in.
• A senior citizen prescription drug program is eliminated.  Saves $9.4 million.
• The state reduces its share of  the cost of transporting students from 90 percent to 70 percent. Saves $14 million.
• The state reduces its share of school construction from (60 – 90%) to 50%. The state would only pay for 50 percent of new school construction; currently, it pays 60 to 80 percent. This applies to new construction projects only.
• Grant-In-Aid would be reduced, eliminating the partnership with the Paramedic Programs (saves $10+M) and reducing funding to Community Agencies by $1.6M.

This plan was wholly insufficient in terms of shared sacrifice.  First off, raising the income tax rate in the top bracket by .2% is a good start, but it is not enough.  And Delaware’s top bracket includes the entire middle class and the wealthy, since Delaware has a flat tax system above the income threshold of $60,000.  Here is our tax structure now:

Our rates right now:
2016 and before
$0 – $2,000 0.00%
$2,000 – $5,000 2.20%
$5,000 – $10,000 3.90%
$10,000 – $20,000 4.80%
$20,000 – $25,000 5.20%
$25,000 – $60,000 5.55%
$60,000+ 6.60%

It is simply insane that a family of four making $60,000 pays the same rate as some rich DuPont earning $600K a year off of interest.  If we are seriously talking about Shared Sacrifice, this flat tax system must end now.  Indeed, any serious budget proposal would include a new progressive tax structure similar to what I propose below.  Any budget without it must be considered dead on arrival in the General Assembly.

Change them to something like this (you can play around with the rates).
$0 – $10,000 0.00%
$10,000 – $20,000 2%
$20,000 – $30,000 3%
$30,000 – $40,000 4%
$40,000 – $60,000 5%
$60,000 – $100,000 6%
$100,000 – $200,000 7%
$200,000 – $300,000 8%
$300,000 – $500,000 9%
$500,000 + 10%

Notice how the lower and middle classes actually get a tax cut with this new structure?   Only people making over 100k will see a tax increase of varying degrees.   Of course, I am not the JFC so I have no properly scored this proposal.  Still, we need at least 3 new top level brackets.