Democratic Delaware Gov. Jack Markell asked for a temporary tax increase in 2009. Now, in order to close the budget shortfall as a result of a 3.5 percent spending increase, he wants to make many of them permanent.
“We first took a look at what kind of shortfall we were facing this year and what it looked like next year and believed that we had to do something on the revenue side,” Markell said. “This is the cleanest thing to do, to send a signal that this is where we are.”
The tax proposal he has sent to the state legislature would make permanent tax increases on individuals and corporations to cover the $56 million budget shortfall the state is expected to face. These tax increases were initially set to expire in July 2013.
“The tax proposals are estimated to generate $27.9 million in the fiscal year beginning in July, and $156.7 million the following year,” Delaware’s News Journal reported.
Other taxes that would be extended include the estate tax and corporation franchise tax.
While most of the tax increases will remain permanent, the governor’s budget proposal includes even deeper tax cuts to a third of personal incomes and to manufacturing companies in the state.
The spending increases in Markell’s budget proposal are a result of increased costs for existing expenses. No state employee would receive a raise.
“If revenue estimates go up, we may have some flexibility to adjust the revenue package downward a little bit or add programs,” Joint Finance Committee co-chair Melanie George Smith said to the News Journal.
Some state senators have been suggested that all of the 2009 tax increases should be extended to help pay for raises for state employees. Over the last two years, legislators have given them 3 percent pay raises.
“You cannot take employees and push them, and push them and push them forever,” Sen. Harris McDowell said. “Eventually you’ve got to recognize that as the employer and the employee you’re in the same boat and if it starts springing leaks, you all have to bail.”
Markell’s budget however does not include provisions to increase starting teacher pay or incentive programs to attract teachers to high-need schools and subject areas. The governor will look to more specific details in the coming months.
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