Delaware reopens debate on tax increases for the richest

Why should Delaware care?
For years, Democrats have failed to pass proposed income tax rate increases on the rich. Although the latest proposal is more modest than what has been previously proposed, it may still face hurdles in a legislative body that has historically been wary of tax increases.

Delaware Democratic lawmakers are, again, looking to increase income tax rates for the state’s highest earners.

Last month, Rep. Sean Lynn (D-Dover) introduced a bill that would slightly increase the tax rate for incomes between $125,000 and $250,000, and increase them further for incomes above $250,000. Lynn’s bill would also overhaul tax brackets more broadly – a change that would slightly lower rates for the lowest income earners.  

His bill, which has not yet been considered in committee, follows past years’ proposals in the state legislature that similarly called for new tax brackets with higher rates on top earners. None of those became law. 

Those past proposals, introduced in 2015, 2017, and 2021, included steeper proposed tax increases than Lynn’s current legislation, with their Democratic sponsors at the time arguing their bills could be a solution to state budget woes, or would make for a fairer overall tax system, according to News Journal stories from those years. 

Lynn declined to comment for this story, and so it is unclear whether his proposal is primarily designed to raise revenue for the state, or to change the way Delaware brings in tax dollars. 

It also is not immediately clear how much additional money the proposed tax increase would add to the state’s General Fund. 

House Speaker Melissa “Mimi” Minor-Brown (D-New Castle)  says it’s too early to determine whether the bill will pass the House, but she supports Lynn’s intent to review the current tax structure. 

“There are far too many Delawareans who are forced to choose between putting food on the table and paying their bills. But we have to be careful with how we approach creating solutions to these issues so they don’t cause more problems in the long run,” Minor-Brown said.  

The bill’s co-sponsor Rep. Eric Morrison (D-Glasgow) and Gov. Matt Meyer also declined to comment for this story.

Meyer has previously expressed interest in changing Delaware’s income tax bracket ranges and possibly raising taxes for high-earners in order to fund some of the state’s initiatives.

“I don’t think it’s right that Delaware families making $70,000 a year pay the same tax rate as Delaware families making $70 million a year,” the governor said at Spotlight Delaware’s Legislative Summit.

On the other side of the aisle, State Sen. Eric Buckson (R-Dover), said he’s open to a conversation about changing the structure of the state income tax system, but said he would not support a bill to bring more money into the General Fund.

“Just adding tax brackets for the purpose of increasing revenue, is something that I, again, would push back on until we get our house in order when it comes to the money we currently have,” he said.  

Lynn’s bill lands as Delaware budget forecasters expect state revenue growth to flatten in the coming years. It also comes as states across the country prepare for potentially tighter budgets due to cost-cutting from the Trump administration that could impact federal contributions to state projects. 

Meanwhile, Meyer is pushing for public education funding reform while a state commission considers whether to recommend boosting spending on schools by as much as $1 billion annually.

The details on HB 13

Lynn’s measure, House Bill 13, would introduce new brackets, including for those making over $125,000, marking a shift from the current structure in which all income over $60,000 is taxed at the same rate of 6.6%.

The bill would propose the following tax brackets and rates:

• Income above $250,000 would be taxed at 6.95%.
• Income between $125,000 and $250,000 would be taxed at 6.75%.
• Income between $60,000 and $125,000 would remain taxed at 6.6%.
• Income between $20,000 and $60,000 would be taxed at 5.5% (meaning individuals earning between $20,000 and $25,000 would see a 0.3% tax increase). 
• Income between $5,000 and $20,000 would be taxed at 4%.
• Lower incomes between $2,000 and $5,000 would be taxed at 2%, down from 2.2%.

Roughly 11% of Delaware households make more than $200,000 annually, according to the 2023 U.S. Census’ five-year American Community Survey.

Editor’s Note: This story has been updated to include responses from House Speaker Melissa “Mimi” Minor-Brown.