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News

December 17,  2010

Federal tax-cuts extension
will reduce state's income

Tax extension legislation enacted by Congress will 'cost' Delaware government an estimated $39 million in revenue not received, the revenue committee of the Delaware Economic & Financial Advisory Council was told. David Gregor, the finance department's director of research and analysis, said $6 million of that will happen in the remaining six months of this fiscal year and $16.5 million in each of fiscal 2012 and 2013. He told the committee at its meeting on Dec. 17 that most of the shortfall -- $28 million --  will be in receipts from corporate income tax. There will be $7 million less in personal income tax collected and anticipated estate tax receipts will  be down $4 million. Delaware, like several other states, calculates those taxes on filers' corresponding federal tax obligation.

The impact of extending the Bush-years tax cuts and including other provisions of the compromise agreement President Obama worked out with Congressional Republicans caused the committee to pare what would have been increases over September estimates in the revenue forecasts it will present to the council on Dec. 20. Instead of anticipating $2.7 million more this fiscal year, it is now looking for the state's general fund to take in $6 million less. If the forecasts hold, the state will net $3.36 billion, up about 4% over the $3.23 billion realized last year. Projected revenue in the next two fiscal years stands at $3.46 billion and $3.59 billion, respectively. The committee was told to expect only "moderate" economic growth over that time span.

2010. All rights reserved.