By John Stapleford

There is talk in Dover about shifting some of the current state tax load to the local governments in Delaware. A quick look at the data from the latest (2015) Census report on state and local government taxes per capita is helpful.

Three things are immediately clear from the chart.

First, the Delaware state and local government tax burden is well below New Jersey and moderately below Pennsylvania and the U.S. average.

Second, the Delaware state and local tax burden is higher than in such competing “sun belt” states as North Carolina and Texas.

Finally, Delaware has the lowest share of the total tax burden that comes from local government.

While it seems obvious that Delaware’s local government could carry more of the tax burden, the devil is always in the details.

Of total 2015 general government revenue for Delaware, 49 percent came from taxes while 22 percent came from the Federal government, 17 percent from charges, and 12 percent from miscellaneous revenue.

By comparison, in the average state in the U.S., 54 percent of general government revenue came from taxes, 23 percent from the federal government, 16 percent from charges, and the remainder from miscellaneous revenue.

Although a similar share of general in North Carolina came from taxes (i.e., 49 percent ), in Texas the share from taxes was 54 percent.

Does it make sense for a state, such as Delaware, to increase the share of its general revenue that comes from taxes to be equal to the national average?

And certainly taxpaying households are more sensitive to some types of taxes than they are to others.

Shifting Delaware’s total tax burden more toward local government means a change in the mix of tax mechanisms. This change in mix will likely shift more of the total tax burden from higher to lower income households.

Dr. John E. Stapleford

President, ECON First

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