Like a reluctant dental patient, the Delaware House of Representatives winced and squirmed through a lengthy session the night of June 29, during which it begrudgingly approved a slew of tax and fee increases designed to help fill a massive hole in the state’s fiscal year 2010 budget.
At the end of the evening, 12 new tax bills had cleared the chamber, and much like after a root canal, many representatives felt a little sore and more than glad to be done with it.
“We had a pretty good run at it tonight,” said Majority Leader Rep. Peter C. Schwartzkopf, D-Rehoboth. “Nobody wants to raise these taxes, but we’re only doing it because we have this huge deficit.”
Tax measures passed by the House include raising gross receipts tax rates by 8%; raising personal income taxes by one percentage point for all income more than $60,000; rescinding a tax exemption for Delaware lottery winnings; reinstituting the state’s inheritance tax; adding a public utilities tax on satellite television; and increasing taxes on cigarettes by 45 cents per pack.
Another bill would raise revenue by offering amnesty to delinquent taxpayers in September and October of this year. During that period, individuals and businesses with outstanding taxes could repay them without interest or penalties.
The House also voted to increase fees for alcohol licenses, recorded documents, birth and death certificates and services provided by the state fire marshal. In addition, the House passed a $100,000 licensing fee increase for companies that engage in petroleum lightering off the Delaware coast. The lightering process transfers petroleum products from a laden tanker to a barge so that the ship can float higher in the water and continue up river.
House Republicans agreed not to block the increases after Gov. Jack Markell said he would incorporate their plan for reducing state personnel costs through attrition into the budget.
The $13.7 million in projected savings from the attrition plan was used to scale back increases to the gross receipts, income and corporate taxes.
Democrats also agreed to accept so-called sunset amendments on the gross receipts, inheritance and personal income taxes. The amendments provide that each tax increase will expire in four years if not renewed by the General Assembly.
Rep. Deborah Hudson, R-Fairthorne, pushed hard for the amendments and asked Schwartzkopf for a “gentleman’s agreement” that the House would revisit the taxes next year even though the sunset won’t yet apply.
Schwartzkopf agreed, but said he thinks it’s unlikely the economy will have recovered enough to allow the state to roll back the increases.
Even with the compromise, votes on the floor still broke neatly along party lines, but on each piece of legislation one Republican sided with the Democrats to secure the three-fifths majority needed to pass revenue bills.
Debate on the tax and fee increases was sparse and sporadic, but some hard-line Republicans could not contain their criticism.
“If we pass all these tax bills we are going to destroy the job market,” said Rep. Gerald W. Hocker, R-Ocean View. “We’re asking the business community to pay the price for our mistakes.”
Each time another representative rose in opposition to the taxes, Schwartzkopf sounded a familiar refrain.
“We’re being asked to do things nobody wants to do,” he said.
However, two major tax proposals did not pass.
A bill that would have increased taxes on beer, wine and spirits was defeated after a Democrat broke ranks and voted against the measure, but Majority Whip Rep. Valerie Longhurst, D-Bear, switched her vote to no thus preserving the Democrats’ right to recall the vote.
Another piece of legislation that would have raised corporate franchises taxes was not heard on the floor. Schwartzkopf said he did not work the bill because he knew he didn’t have the votes.
The majority leader said he was hopeful that at least one member of the Republican caucus would come around and allow the bills through sometime the next day.
Overall, most representatives were relieved that the tax bill votes were behind them.
Though the bills still needed to clear the Senate, any resistance there likely would be short lived since the Democrats enjoy a comfortable majority in the chamber.
With the dirty work done, the House was ready for a calm but lengthy denouement on Tuesday, June 30.
The General Assembly still needed to approve budget, bond and grant-in-aid bills before the state government could begin to spend money in fiscal year 2010, which begins July 1.
The biggest wrinkle yet to be ironed out as of the Dover Post’s press time was a plan to swap all or part of a proposed 2.5% state pay cut for furloughs.
The House Republican leadership said they were pushing for a furlough provision to be incorporated into the grant-in-aid bill, which deals generally with funding for senior citizen homes and other community organizations.
Gov. Jack Markell said he was considering a furlough proposal, but that any such plan would probably be presented as an option for those state agencies that could come up with a workable furlough scheme. The pay cut, he said, would still have to apply to agencies for which a furlough would not be feasible.
Email Doug Denison at doug.denison@doverpost.com
