This is the bill that we are going to be fighting over in the next 9 days (or longer during the upcoming Republican-caused government shutdown). This is Democratic tax plan that adds a new income bracket above $150,000. This bill is not all that I would like, since I want two or more new brackets at the top end of incomes, but it does get us pointed in the right direction of repairing Delaware’s structural deficit problem all the while making our income tax structure a little bit more fair.
Here is the plan:
| Income | Current Rate | New Rate | Change |
| <$2000 | 0 | 0 | 0 |
| $2,001 – 5,000 | 2.20% | 2.40% | 0.2 |
| $5,001 – 10,000 | 3.90% | 4.20% | 0.3 |
| $10,001 – 20,000 | 4.80% | 5.20% | 0.4 |
| $20,001 – 25,000 | 5.20% | 5.50% | 0.3 |
| $25,001 – 60,000 | 5.55% | 5.70% | 0.15 |
| $60,001 – 150,000 | 6.60% | 6.80% | 0.2 |
| >$150,001 | 6.60% | 6.95% | 0.35 |
Percentages are always abstract, so let’s talk about real dollar amounts. I saw an analysis that shows the following. The lowest taxable bracket ($2,001 – 5,000) will pay $4.19 more a year. Those making $5,001 – 10,000 will pay an extra $16.49 a year. Those making $10,001 – 20,000 will pay $52.89 more a year. Those making $20,001 – 25,000 will pay $65.19 more a year. Those making $25,001 to 60,000 will pay $117.68 more a year. And those making between $60,001 to 150,000 will pay $297.68 more a year.
The plan would eliminate itemized deductions but raise the standard deduction from $3,250 to $5,000 ($6,500 to $10,000 joint filing) to compensate for that. The bill also would gradually raise the age someone has to reach before they are eligible for the $12,500 exclusion of income for pensions and other retirement income, from the age of 60 to the age of 65 in 2021.
This Democratic plan would raise $68 million in the next fiscal year (2018) and $211 million in fiscal year 2019.
AN ACT TO AMEND TITLE 30 OF THE DELAWARE CODE RELATING TO TAXES ON PERSONAL INCOME.
UPDATED: 6/22/17
SPONSORS: Longhurst, Henry, McBride, Poore, Schwartzkopf, Viola, Baumbach, Keeley
YES VOTES – HOUSE:
YES VOTES – SENATE:
NO VOTES – HOUSE:
NO VOTES – SENATE:
HISTORY: Placed in House Revenue & Finance Committee on 6/15/17. Reported out of that committee on 6/21/17.
STATUS: On House Ready List
Is Kowalko’s alternative still in consideration at all? It’s a much better proposal.
From my understanding, not his specific bills. On the top end, one new bracket is all we are going to get this time around. And I feel like the increases in the tax rate on the other brackets is flexible. There won’t be any cuts, but maybe there won’t be rises or the rises will be lowered.
The Kowalko plan is much better. It does not raise tax rates on those who cannot afford it, adds a second bracket and produces more income. I wish everyone would stop calling the current plan the Democrats plan. It is the good old boys plan designed to minimize impact on the rich. The Kowalko plan is a true progressive plan that all Democrats should be proud to support.
“The plan would eliminate itemized deductions but raise the standard deduction from $3,250 to $5,000 ($6,500 to $10,000 joint filing) to compensate for that.”
So, if you itemize and your itemized deductions are more than $6,500 or $10,000 jointly you not only pay a higher rate but your taxable income increases. Hmm, that doesn’t seem right. How about choose to itemize or take standard deduction whichever is more?
Additionally there is concern in the non-profit community that eliminating itemized deductions, read charitable deductions, will lead to a decrease in donations. In all likelihood GIA will also be cut, that is a harsh blow to non-profits bottom lines to see state aid and donations decrease in the same year.
Since I posted this I have had discussion with a friend and read some posts on other sites. I don’t like the elimination of itemized deductions,and really didn’t pay much attention to that point, until I looked back at my tax return. But , Delaware needs a revenue bill passed. The state simply cannot make up the deficit with cuts alone. I would like to see a better bill, but time is short and this is what we have.
It might not be perfect, but we need a revenue bill and it needs to be brought to the floor for a vote.