Delaware Business Magazine - November/December 2023

Page 15

Now is the Time for Tax Relief, Not an Increase BY JORDON N. ROSEN, CPA, MST, AEP®

No one likes a tax increase. The truth of the matter is that sometimes an increase is needed. This is not one of those times. House Bill (HB) 128 (effective in 2024), which passed the House Revenue and Finance Committee and is currently awaiting consideration on the House Ready List, contains such an increase. Currently, Delaware taxes personal income on a graduated rate basis beginning at 2.2% on taxable income over $2,000, up to 6.6% on taxable income above $60,000. The bill would add another bracket of 6.9% on taxable income over $100,000. This is not good for several reasons. First, it opens the door for adding additional higher brackets above 6.9% in future years, with the thought that adding one new bracket at a time might fly under the radar. Second, we are still in a volatile economy, with high interest rates and higher than normal inflation. At the time of this writing, the expectation is that there will be another interest rate increase by year end. Everyone, in all tax brackets is hurt by higher interest rates on credit cards, home equity loans and auto purchases, as well as higher than normal inflation reflected on grocery bills and when filling our gas tank. Burdening any group of taxpayers with higher tax rates is simply adding salt to the wound. A positive aspect of HB 128 is that it both expands the 4.8% bracket and completely eliminates the 5.2% bracket. This lowers the tax burden for many Delawareans by avoiding “bracket creep”, whereby an individual’s taxable

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DELAWARE BUSINESS

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November/December 2023

income otherwise creeps into a higher bracket over time due to inflationary wage increases, but they are otherwise in no better financial condition due to the effects of inflation. By contrast, however, the bill does not provide expansion of either the 5.55% or the 6.6% brackets. To be fair to all Delaware taxpayers, all tax brackets should be indexed annually based on the prior year’s cost of living index to avoid bracket creep. A corresponding bill is HB 89, which doubles the Delaware standard deduction beginning in 2024. This is certainly a welcome move as it will cause many taxpayers to switch to the standard deduction (and increases the deduction for those who already don’t itemize), saving many Delawareans from the burden of recordkeeping, as well as the State’s burden of administration and examination. Where

this bill falls short is that it does not provide a similar provision to increase the additional standard deduction for taxpayers age 65 and over or blind. The Delaware legislature needs to address this oversight, given the growing population in the state of taxpayers aged 65 and over. As if a rate increase, bracket creep, and no change to the additional standard deduction would have a negative impact on our senior population, the legislature also needs to consider doubling, or at least indexing the $12,500 annual pension and retirement income exclusion for those age 60 and over ($2,000 pension exclusion for those under age 60). These limits have long been stagnant and eroded by inflation, reducing the purchasing power of senior citizens. Keeping these limits at their original 1999 level is counterproductive as they were enacted in part to counter the fact that retirees could move to a state such as Pennsylvania, which doesn’t tax any retirement or IRA income. And again, the benefit is eroded by the impact of inflation over the past 24 years. There is work to be done. Jordon N. Rosen is a former tax director and shareholder at Belfint, Lyons and Shuman, CPAs and past chair and current member of the Delaware State Chamber’s Tax Committee.

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Articles inside

Message from the President

2min
page 4

Newsbites

9min
pages 58-60

The Right Balance in AI Governance

3min
page 56

Raising the Bar on Tech in Delaware

4min
pages 54-55

Investing Where We Live and Work

3min
page 52

Generative AI

3min
page 50

Delaware's Entrepreneurial Mindset

4min
page 48

Delaware is a Tech Hub

3min
page 46

The Next Era of Exploration is Here

3min
pages 44-45

How to Build a Thriving Small City

3min
pages 40-41

Embrace Variety

4min
pages 38-39

We Are All Connected to the Housing Crisis

3min
page 36

Continuing to Evolve

5min
pages 34-35

Delaware Voices & Data

4min
page 32

Making Affordable Housing a Priority

3min
page 31

Superstars in Business Winner: Belfint, Lyons & Shuman, P.A.

4min
pages 28-29

Superstars in Business Winner: Breakwater Accounting + Advisory

4min
pages 26-27

Superstars in Business Winner: NERDiT NOW

4min
pages 24-25

Superstars in Business Winner: Children's Beach House

4min
pages 22-23

Marvin S. Gilman Superstars in Business

3min
pages 20-21

Now is the Time for Tax Relief, Not an Increase

3min
page 15

Funding Success and Equity

3min
page 14

Message from the Chair

3min
page 13

How Delaware Will Benefit from Offshore Wind

3min
page 12

Ambassador Spotlight: Nadir Rasheed

3min
page 11

Diverse Supplier Spotlight: GGA Construction

2min
page 10

Committee Spotlight: Tax & Finance

2min
page 9

Nonprofit Spotlight: American Cancer Society

3min
pages 8-9

Business Spotlight: First Citizens Community Bank

3min
page 7

Legislative Priority: Reflecting on 2023

3min
pages 5-6
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