Why should Delaware care? For years, Democrats have failed to pass proposed income tax rate increases on the rich. Although the latest proposal is more modest than what has been previously proposed, it may still face hurdles in a legislative body that has historically been wary of tax increases.
Delaware Democratic lawmakers are, again, looking to increase income tax rates for the state’s highest earners
Last month, Rep. Sean Lynn (D-Dover) introduced a bill that would slightly increase the tax rate for incomes between $125,000 and $250,000, and increase them further for incomes above $250,000. Lynn’s bill would also overhaul tax brackets more broadly –- a change that would slightly lower rates for the lowest income earners.
His bill, which has not yet been considered in committee, follows past years’ proposals in the state legislature that similarly called for new tax brackets with higher rates on top earners. None of those became law.
Those past proposals, introduced in 2015, 2017, and 2021, included steeper proposed tax increases than Lynn’s current legislation, with their Democratic sponsors at the time arguing their bills could be a solution to state budget woes, or would make for a fairer overall tax system, according to News Journal stories from those years.
Lynn declined to comment for this story, and so it is unclear whether his proposal is primarily designed to raise revenue for the state, or to change the way Delaware brings in tax dollars.
It also is not immediately clear how much additional money the proposed tax increase would add to the state’s general fund.
The bill’s co-sponsor Rep. Eric Morrison (D-Glasgow) and Governor Meyer also declined to comment for this story.
On the other side of the aisle, Sen. Eric Buckson (R-Dover), says he’s open to a conversation about changing the structure of the state income tax system, but said he would not support a bill to bring more money into the general fund.
“Just adding tax brackets for the purpose of increasing revenue, is something that I, again, would push back on until we get our house in order when it comes to the money we currently have,” he said.
Lynn’s bill lands as Delaware budget forecasters expect state revenue growth to flatten in the coming years. It also comes as states across the country prepare for potentially tighter budgets due to cost-cutting from the Trump Administration that could impact federal contributions to state projects.
The details
Lynn’s bill would introduce new brackets, including for those making over $125,000, marking a shift from the current structure in which all income over $60,000 is taxed at the same rate of 6.6%.
The bill would propose the following tax brackets and rates:
- Income between $125,000 and $250,000 would be taxed at 6.75%.
- Income above $250,000 would be taxed at 6.95%.
- Lower incomes between $2,000 and $5,000 would be taxed at 2%, down from 2.2%.
- Income between $5,000 and $20,000 would be taxed at 4%.
- Income between $20,000 and $60,000 would be taxed at 5.5% (meaning individuals earning between $20,000 and $25,000 would see a 0.3% tax increase).
- Income between $60,000 and $125,000 would remain taxed at 6.6%.
Roughly 11% of Delaware households make more than $200,000 annually, according to the 2023 U.S. Census’ five-year American Community Survey.
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