Panel approves another boost to Delaware revenue estimates

NEW CASTLE — Delaware’s official government revenue estimates continue to climb as the time nears for lawmakers to begin marking up a proposed $4.4 billion operating budget for next year.

The Delaware Economic and Financial Advisory Council on Monday increased its revenue estimate for the current fiscal year by $37.9 million compared to its March estimate. The panel also increased its forecast for the fiscal year starting July 1 by $12.9 million, to $4.58 billion.

A major factor in the upward revision for each year was corporate income tax estimates, which increased by $35.3 million for this year since last month. Officials said that amount included an unexpected $10 million in estimated payments for this year from a handful of companies that have had no reported tax liability in recent years.

David Roose, director of research and tax policy, described the unexpected tax payments as “essentially money falling from the sky.”
“We don’t understand exactly why we have it,” Roose told council members, while cautioning that some or all of the money might have to be refunded next year based on the companies’ actual tax liability.

Officials also noted that the fiscal impact of corporate income tax reforms enacted in 2016 as part of an economic development initiative appears to be significantly less than first thought. One reason is that a small group of companies expected to benefit from the changes have been less profitable than they were in the past, meaning the amount of lost tax revenue is less than expected.

“We’re seeing that they, at least right now, are reporting little to no taxable income,” said Secretary of Finance Rick Geisenberger. “The Delaware Competes Act is appearing to cost the state less than the original fiscal note that was adopted in 2016.”

Previous estimates put the loss to the state from the 2016 reforms at about $23 million for the current fiscal year and $24.9 million next year. Roose said the actual impact is expected to be about $4.2 million this year and $6 million next year.

The updated revenue estimates also reflect stronger projections for corporate franchise tax revenue this year and next year, which helped offset declines in realty transfer tax estimates and corporate fees.

Democratic Gov. John Carney said the revenue growth is a positive sign for Delaware’s economy and the state’s budget. Carney reiterated, however, that officials should be wary of depending on revenue from volatile source like the corporate income tax.

“We should not use one-time revenue to fund ongoing expenses,” Carney said in a prepared statement. “That’s why we will continue to talk to legislators about dedicating one-time revenue to one-time expenses like infrastructure projects and open space preservation — while putting money away to prevent spending cuts the next time our revenue picture trends downward.”

You are encouraged to leave relevant comments but engaging in personal attacks, threats, online bullying or commercial spam will not be allowed. All comments should remain within the bounds of fair play and civility. (You can disagree with others courteously, without being disagreeable.) Feel free to express yourself but keep an open mind toward finding value in what others say. To report abuse or spam, click the X in the upper right corner of the comment box.

Facebook Comment