PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

STATE OF THE WEEK: Delaware

By at 29 March, 2017, 1:52 pm

State May Get Costlier and Less Competitive

by Raymond J. Keating-

Small Business Policy Index 2017: Delaware ranked 34th among the 50 states.

SBE Council’s “Small Business Policy Index 2017” ranks the 50 states according to 55 different policy measures, including a wide array of tax, regulatory and government spending and performance measurements.

Small Business Tax Index 2016: Delaware ranked 35th among the 50 states.

SBE Council’s “Small Business Tax Index 2016” ranks the states according to 25 different tax measures. Among the taxes included are income, capital gains, property, death, unemployment, and various consumption-based taxes, including state gas and diesel levies.

Delaware Governor Proposes New Taxes

From a policy perspective, Delaware is far from a hospitable place for entrepreneurship, small businesses and investors. Indeed, the state ranks poorly on SBE Council’s “Small Business Policy Index” and “Small Business Tax Index.”

Consider, for example, that Delaware imposes high personal income and individual capital gains tax rates, burdensome corporate income and capital gains taxes, weighty workers’ compensation costs, a high level of state and local government spending, and a death tax.  At the same time, there are positives, most notably, low property and consumption-based taxes. In the end, though, the policy scales, unfortunately, tilt very much against the entrepreneurial sector of the state’s economy.

But instead of working to reduce government burdens on small businesses and their employees, Delaware Governor John Carney has served up tax increases in his budget plan.

Carney calls for increasing corporate franchise, personal income and tobacco taxes. The state’s top tax rate would be increased from 6.6 percent to 6.8 percent. For good measure, itemized deductions for individuals would be eliminated, though with an increase in the standard deduction.

But there apparently is more. Carney even seems to not like the fact that Delaware has low property taxes. During a recent radio interview, Governor Carney was quoted as follows by WDEL.com: “‘Here’s the way I look at taxes: they ought to be fair; they ought to be simple; they ought to generate revenue; and they ought to enable us, as a state, to be more competitive,’ he said. ‘[That’s where] we are too competitive. People move to our state because our property taxes are so low. I hear people who’ve moved here from Pennsylvania, from New Jersey, from New York: “I got a bill and I thought it was a quarterly or monthly payment.” But that’s their payment for the year.’” So, Carney seems to think that a clear competitive edge in an area of taxation is troubling?

Delaware already had a long road ahead to make itself a more welcoming state for entrepreneurs and small business. Unfortunately, Governor Carney’s proposed tax increases would only make matter worse.

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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

Keating’s latest book published by SBE Council is titled Unleashing Small Business Through IP:  The Role of Intellectual Property in Driving Entrepreneurship, Innovation and Investment and it is available free on SBE Council’s website here.

 

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