2015 Reinventing Delaware Ideas
Economic Impact Bonds. Replace the existing strategic fund structure with an economic impact bond to develop concepts to fund business development incubators like biotech center, DESCA, or other entrepreneurial start up. As opposed to the Delaware Strategic Fund, where well-connected, large companies get million dollar government subsidies to keep/bring jobs to Delaware, by using Economic Impact Bonds (EIBs), the Strategic Fund pool would be used as the capital reserve to underwrite the EIBs. Money would be paid out, only if the jobs actually were created.
Reduce the Personal Income Tax rate to 2.4% (so that companies who are incorporated here will move their headquarters and other jobs here, attracted by the lower PIT)
The Arden Plan – Make Delaware the premier destination spot to start a business, to raise a family and the destination to retire. This can be achieved by completely abolishing the personal income tax, eliminating the corporate income tax, gross receipts tax, the estate and inheritance tax. This revenue can be replaced by establishing one flat tax of 1.4% on all Delaware property. A statewide revaluation of property would need to be conducted initially and every ten years to accurately identify current real estate market value. It’s estimated that this would represent a new $3,920 tax on the average Delaware $280,000 residential property.
Eliminate Inheritance Tax and stop those funds from moving to Florida.
Prepaid Estate Tax. The Delaware Estate Tax (ET) encourages high net worth individuals to leave and discourages in-migration of the wealthiest job creators and retirees. State projections have been for the ET to generate $5million annually – in reality it contributes $2million. Had the ET never been created and the “escapees” remained DE residents, their income taxes would, most likely, have more than offset the estate tax.
I suggest the creation of prepaid estate tax vouchers, possibly in two pools – one for current residents and a second for nonresidents that could be used if they become residents. A voucher could be used to satisfy 100% of the holder’s ET. The vouchers would be auctioned periodically (e.g. using either a treasury style or Dutch auction).
The vouchers would be of greatest interest to people that otherwise would leave the state or to residents of other states that might want to ensure that they have a haven to avoid estate taxes. While most states do not have an ET, all states to the north and east of MD do (except NH).
Calculations show that the vouchers would improve ET revenues – even before accounting for income taxes retained and other economic benefits from keeping the purchasers in state. Assume just 50 vouchers in each pool selling for $100,000 each x two pools = $10million. For these individuals, $100,000 would be a bargain.