Stakeholders say that the new corporate tax cuts need to be viewed with caution until the IRS sorts out the details.
Companies poised to benefit from federal tax breaks will have to wait until the Internal Revenue Service parses out the rules and regulations.
The Delaware Economic and Financial Advisory Council is predicting a 5.6 percent increase in 2018 revenue statewide, while taking a cautionary look at the tax cut’s effect on business.
According to Rick Geisenberger, secretary of the Department of Finance, most of that forecasted $226.5 million increase – over 90 percent, or roughly $211.1 million – is due to the revenue package passed by the General Assembly last year.
“It’s not attributed to revenue growth rates,” Geisenberger said.
That package, he said, was comprised of increases in a variety of taxes, including corporate franchise, real estate transfers, and cigarette, alcohol and beverage taxes.
On top of the revenue package, roughly $70 million is available as result of what he said are considered one-time impact fees.
“We brought in $55 million of additional revenue in 2017 that was not forecasted in June, which admittedly sounds like a large number,” Geisenberger said. “But in light of state’s total revenue, it’s not.”
Regarding the corporate tax cuts, only time will tell how they will play out.
“There is a lot of uncertainty around the new tax package, and what its effects will be, which is fairly unpredictable,” Geisenberger said. “The IRS interpretation, and how the businesses interpret it, and how they play out, is not going to happen in one year, but multiple years.”
Last month, all three major credit rating agencies again awarded Delaware a AAA rating, citing the state’s ongoing commitment to strong fiscal management, according to a press release.
During his keynote speech at the 181st annual Delaware State Chamber of Commerce dinner on Jan. 8, former Vice President Joe Biden applauded the economic opportunities Delaware had to offer, while also decrying businesses that are overly reliant on automation at the expense of jobs.
“The economy of the world is changing,” Biden said. “And a lot of middle class people that are living the Middle Class Dream – they are in danger. They’re scared to death that they’re going to lose their ability to make it.”
James DeChene, Chamber senior vice president of government relations, said the changes to the tax structure could make for interesting outcomes once the guidelines have been sorted out.
“The IRS still has some rulemaking to hand down,” DeChene said. “It will be interesting to see what repatriation amounts are, and how they are handled. Not so much from a federal tax perspective, but if the companies should be paying repatriated states.”
He also said all eyes may rest on the companies surrounding the impending Dow-DuPont Merger.
“There could be pockets of real big opportunities for development across New Castle County and across the state,” DeChene said.
Statewide, he said they are seeing consistent growth in the emerging financial tech – or, fintech – industry, from both securities and the transactional side.
“I think that it’s been interesting to see how the smaller companies can play in this space,” he said.
Walmart, which recently announced an increased $11 starting wage, has a widespread presence throughout the state, with six supercenters, three discount stores, and one Sam’s Club, along with a distribution center in Smyrna.
In a press release, Walmart president and CEO Doug McMillon said the company is still in the early stages of assessing the opportunities tax reform will present the company.
“Tax reform gives us the opportunity to be more competitive globally and to accelerate plans for the U.S.,” McMillon said.
Lewes Chamber of Commerce Executive Director Betsy Reamer said the Sussex business outlook remains strong, with none of the storefronts in the historic Lewes business district empty and businesses lined up for openings when they occur.
“We’re also basing that on how strong housing sales are at the moment, and the [new] construction going on there,” Reamer said.
She said the Chamber has added 13 new members in just the past month.
“There is a lot of interest in people moving here from major metropolitan areas,” she said. “When the economy took a dive, we were still getting people coming in wanting to be here, but couldn’t because they were unable to sell their houses. But we’re seeing growth in that area again.”