With the start of the new legislative session last week, we must take concrete steps to avoid the last minute budget scramble in June. Delaware needs to improve the long-term stability of its revenue streams by creating two new personal income brackets. HB 14 and HB 15 would create brackets applicable to Delaware taxable income in excess of $125,000 and in excess of $250,000.
Currently, our highest bracket is rate is $60,000, and income over that $60,000 is taxed at 6.6% (income below and up to the $60,000 is taxed between 2.2% and 5.55%). The proposed bills would add a bracket for income between $125,001 and $250,000 at 7.1% and for income over $250,000 at 7.85%.
Current PIT brackets
$2,001 to $5,000 taxed at 2.2%
$5,001 to $10,000 taxed at 3.9%
$10,001 to $20,000 taxed at 4.8%
$20,001 to $25,000 taxed at 5.2%
$25,001 to $60,000 taxed at 5.55%
$60,001 and above taxed at 6.6%
Proposed PIT brackets
$2,001 to $5,000 taxed at 2.2%
$5,001 to $10,000 taxed at 3.9%
$10,001 to $20,000 taxed at 4.8%
$20,001 to $25,000 taxed at 5.2%
$25,001 to $60,000 taxed at 5.55%
$60,001 to $125,000 taxed at 6.6%
$125,001 to $250,000 taxed at 7.1%
$250,001 and above taxed at 7.85%
After these new brackets are created, a single taxpayer earning $250,000 in taxable income pay an additional $625 in taxes (for the 0.5% increase over the current rate of 6.6%). A taxpayer earning $500,000 will pay $3,750 more than under our current system (for the 1.25% on income over $250,000 along with the $625 increased tax obligation for the income between $125,001 to $250,000).
These increases are not inconsequential, but they are necessary to restore equity to our increasingly stratified economic system. After a slew of tax cuts for the richest corporations and the repeal of the estate tax, the State's responsible revenue sources have diminished. We cannot continue to force the already overburdened middle class to continue to foot the bill for tax giveaways to wealthy individuals and corporations. Everyone must pay their fair share.
The creation of these brackets is to restore a fairness and stability to Delaware's revenue stream without overburdening any Delaware family or wage earner. Together, we will ensure the necessary services provided by government (such as roads, police, and education) are adequately funded and are able to promote economic growth and stability for all citizens of our State.
John Kowalko
State Representative
25th District