Unemployment benefit and alcohol-service bills released from committee, income tax measure filed

DOVER — A House panel Wednesday approved legislation aimed at preventing Delawareans from having to pay taxes on unemployment benefits and fixing the rates paid by employers, as well as a bill extending provisions regarding alcohol takeout.

The bills were released by the House Administration Committee and should be voted on by the full chamber in the next two weeks.

Wednesday marked the second day of the 151st General Assembly, which is being held entirely virtually at least through the end of January.

House Bill 65 would exempt unemployment benefits paid in 2020 from Delaware state income tax, saving residents a combined $21 million. More than 100,000 Delawareans have filed for unemployment since the start of the pandemic in March.

The proposal also sets the 2021 new employer assessment rate, average industry assessment rate and average construction industry assessment rate at the same level as 2020 to avoid forcing businesses and nonprofits to pay more as a result of the increase in jobless claims. Holding the tax rate at 1.8% will save new employers up to $264 per employee in 2021, while keeping the new construction employer tax rate at 2.3% will save up to $165 per worker in 2021, according to the Division of Unemployment Insurance.

“Thousands of hard-working Delawareans have lost their jobs during the past year through no fault of their own. We owe it to those impacted by the pandemic to take whatever action we can to ease their burden,” main sponsor Rep. Ed Osienski, D-Newark, said in a statement. “Exempting the unemployment benefits that have been a lifeline to so many families will mean that they aren’t blindsided when they file their state taxes this year, and we’re also taking steps to protect businesses so they aren’t penalized with higher taxes during the pandemic.”

House Bill 1 would continue allowing restaurants and similar businesses to provide alcohol for takeout, curbside or drive-thru service and would enable them to keep offering expanded outdoor seating. The current authorization, approved in 2020, is set to expire at the end of March. The bill would continue it for another year.

Carrie Leishman, president and CEO of the Delaware Restaurant Association, spoke strongly in favor of the bill, saying the industry has lost $1 billion in annual revenue.

While there’s a long path back to normalcy and stability, she said, “this is a start.”

Income tax bill
Democratic lawmakers on Wednesday filed legislation that would raise income taxes for the state’s top earners. House Bill 64 would create three new income tax brackets that would affect only people who make at least $125,000 a year.

Delaware currently has six personal income tax brackets, with the top one imposing a rate of 6.6% on all income of more than $60,000. The bill would tax income from $125,001 to $250,000 at 7.1%, $250,001 to $500,000 at 7.85% and above $500,000 at 8.6%. The state’s top bracket has remained at $60,001 and up for more than 20 years.

Under the legislation, a taxpayer who earns $250,000 in a year would pay an additional $625.

“This bill is intended to ensure a more fair and equitable progressive tax structure that is sustainable and not overly burdensome to any category of earners,” main sponsor Rep. John Kowalko, D-Newark, said in a statement. “It has been carefully calculated to apply a minimal amount of tax increases while ensuring a sustainable revenue source in future economic downturns.”

Personal income taxes are among Delaware’s most consistent and reliable revenue sources, meaning the levels remain similar regardless of the state of the economy.

“An income tax structure that has graduated rates for lower incomes but a flat tax for all top-earners is, to be blunt, only half-built. Rightfully, we tax the first $60,000 earned at lower rates, which increase step-by-step,” co-sponsor Sen. Marie Pinkney, D-Bear, said in a statement. “But the final step — 6.6% for all income $60,000 and above — should be the middle of the ladder, not the end.

“Other states and the federal government recognize this and have brackets for incomes up to the millions. That makes sense, not just because it’s fair but because it is built to last. As inequality grows and wealth is moved from bottom to top, our tax policy should change with the times. This bill helps us do that and I am proud to be on as a Senate sponsor.”

The bill has been assigned to the House Revenue & Finance Committee.

Senators unanimously confirmed four new cabinet members Wednesday: Secretary of Transportation Nicole Majeski, Human Resources Secretary Amy Bonner, Chief Information Officer Jason Clarke and Budget Director Cerron Cade.

Mr. Cade was most recently the secretary of labor, Mr. Clarke was the acting CIO for the Department of Technology and Information, Ms. Bonner was the deputy director of the Office of Management and Budget, and Ms. Majeski had been the deputy transportation secretary since 2011.

“I want to thank members of the Delaware Senate for their thoughtful consideration of these important Cabinet nominations,” Gov. John Carney said in a statement. “This is a group of Delawareans who are driven by public service. Their experience, good judgment, and commitment to Delaware will serve our state well. Our goals are simple. We want to rebuild from the COVID-19 crisis and make Delaware an even better place to live, work, and raise a family. Working together, I firmly believe Delaware will come out of this difficult period stronger than ever.”

Six of the 16 cabinet agencies have new leadership from one year ago, and with Mr. Cade leaving his post, that number will soon jump to seven. He is expected to be replaced in the Department of Labor by Deputy Secretary Karryl Hubbard.

Gov. Carney also nominated two Delawareans for judgeships: Craig Karsnitz to serve as resident judge for the Superior Court in Sussex County and Robert Robinson to join the court in Sussex.