Why Should Delaware Care?
With budget hearings next week and a new revenue forecast announced last Monday, lawmakers are now increasingly turning their attentions to bills that will impact revenues and spending.
With five weeks left in Delaware’s legislative session, lawmakers on Thursday voted to move two tax bills a step closer to becoming law.
One bill – which would allow Newark to impose a city tax on the University of Delaware – passed the Senate and now awaits a signature from Gov. Matt Meyer
The other – which would expand a tax credit that returns money to tens of thousands of low-income workers – passed out of a committee. Lawmakers did so following warnings that the bill could be pared back during budget negotiations in the coming weeks.
The legislative action came one day after Delaware’s Speaker of the House Melissa Minor-Brown indicated that another tax bill, which would increase taxes on the richest in Delaware, was unlikely to pass this year.
‘Students use city roads’
On Thursday afternoon, the full Delaware Senate met to consider several bills including one that would authorize Newark to collect a $50 tax from the University of Delaware for each student that attends the city campus during each semester.
The bill was originally introduced last spring by Rep. Cyndie Romer (D-Newark) and re-proposed earlier this year.
During the Thursday hearing, Senate President Pro-Tem David Sokola said Newark residents have become “increasingly frustrated by the financial burden” imposed by the university’s flagship campus, which sits within its limits. He noted that more than 40% of properties in the city are tax-exempt, and most of those are owned by the University of Delaware.
“Students use city roads, parks, bike lanes and police,” Sokola said.
Following Sokola’s comments, no one spoke in opposition to the bill. But, in past weeks, opponents have argued that the measure will burden students who already pay city taxes while living off-campus, or students who are already living below their means to pay for school.
“What this bill would do is punish graduate students for attempting to attain a higher education,” Max Bobbin, president of UD’s Graduate Student Government, said during a committee meeting in March.
The bill passed the Senate overwhelmingly on Thursday. It now awaits action by the governor. A spokesman for Meyer did not immediately reply to a question Thursday as to whether the governor planned to sign the measure.
More money for the working poor?
Hours before the full Senate met Thursday, the House Revenue and Finance Committee held a morning meeting to consider a bill that would expand Delaware’s earned income tax credit (EITC).
The sponsor, Rep. Lyndon Yearick (R-Dover), testified to the committee that the measure would lift people out of poverty, calling it “one of the best ways to support the working poor.”
The bill also indicates that the Delaware GOP may be following a more populist playbook than it had in years past.
Currently, state tax law allows workers who qualify for the federal Earned Income Tax Credit to also to claim a state tax credit that totals 4.5% of the refund amount received from the federal government.
Under House Bill 99, that amount would jump to 20%.
In recent years, more than 60,000 workers claimed Delaware’s earned income tax credit.
On Thursday, several members of the Revenue and Finance Committee, as well as one state finance official, expressed doubts that the bill’s $20 million annual cost would be too much for the state during a tight budget season.
“What gives me pause right now is the fiscal note,” Rep. Kendra Johnson (D-New Castle) said. “The thought of spending $20 million, when $20 million may need to get pumped back into Medicaid or (into) other human services partners that we have within the state just gives me great concern.”
Delaware lawmakers each year give tens of millions of dollars to nonprofits through the annual grants-in-aid bill. Many of those nonprofits provide social and health services.
Yearick acknowledged the fiscal uncertainty currently facing government and nonprofits, but argued that households also face financial struggles. He said the $20 million cost of his bill would be “financially made back up” when refund recipients spend the money back into the economy.
“Fifty percent of us are paycheck-to-paycheck,” he said.
Also expressing concerns about the financial hit of the bill was Delaware’s Deputy Secretary of Finance Rebecca Goldsmith, who warned lawmakers that a “quadrupling” of the tax credit would come “with substantial fiscal and policy implications.”
She said a family with three children or more who qualify for the credit could see their refund jump from $352 under the current statute to over $1,200 under Yearick’s proposal.
She also said an expanded tax credit would increase the risk of fraud, but did not provide details to support the assertion.
The committee chair, Rep. Madinah Wilson-Anton (D-Bear), said she will support the bill’s passage through her committee “with the understanding that the Joint Finance Committee will have to take it upon them to make a decision.”
The 12-member Joint Finance Committee, which will meet next week, is responsible for drafting Delaware’s operating budget and grants-in-aid bill.
Ultimately, the House Revenue and Finance Committee voted to advance the tax credit bill. It now proceeds to the House Appropriations Committee.
