Del. governor gets tax increases approved

DOVER, Del. (AP) -- A package of tax increases that Delaware Gov. Jack Markell sought to help pay for his proposed spending plan for next fiscal year is headed to his desk after receiving final legislative approval by the state Senate on Thursday.

The Democrat-controlled Senate approved the tax increases on a 13-7 straight party line vote, with no Republicans voting in favor and no votes to spare for the required three-fifths majority.

The legislation narrowly cleared the Democrat-led House on a similar party line vote last week.

The bill increases the annual tax on limited liability companies and business partnerships from $250 to $300. It also increases the minimum annual corporation franchise tax by $100.

Administration officials say the tax increases should generate an additional $51 million next year, with out-of-state entities paying more than 95 percent of that amount. But they acknowledge that the tax increases could affect around 40,000 businesses in Delaware, including many mom-and-pop operations.

Republicans argued that a vote on the tax increases was premature because the state revenue forecast panel will meet three more times before lawmakers must pass a budget. They also noted that Delawareans are facing more potential tax burdens from Markell's calls for higher gas taxes and a household tax to pay for clean-water initiatives.

GOP lawmakers also argued that the bill sends the wrong message to the business community around the world and could, in the long term, affect Delaware's reputation as an attractive place to form business entities. Delaware is the legal home for more than 1 million business entities, including more than half of all publicly traded companies in the United States.

"I think we're absolutely forgetting the long-term effects this may have on our state attracting business to Delaware," said Senate Minority Leader Gary Simpson, R-Milford.

Sen. Robert Venables, a Laurel Democrat, agreed that if the state keeps raising taxes, it could eventually alienate the business community.

But Venables said he would be voting for the measure, reluctantly, given the state's current financial picture and increasing costs for Medicaid, school enrollment and other budget categories. He also expressed dismay that Republicans likely will use the tax increases as an election-year campaign issue.

"It's not right that they're going to be able to go out and say these Democrats are nothing but people who want to raise taxes all the time," he said.

"I'm going to be the 13th vote and I'm going to catch hell from some of the people put there."

Simpson responded by noting that Democrats effectively exercise one-party rule in Delaware.

"Today, you really don't have to come to this side to ask permission to raise taxes, or anything else for that matter," he said.

Sen. Colin Bonini, R-Dover, said the legislature eventually is going to have to take a hard look at state spending and budget items that remain on "autopilot" from year to year without being questioned.

"We have to have a discussion about where the money goes ... We have a lot of things that have been sacred in this building for a long time," he said.

Administration officials say the tax increases would be reflected in payments for this year that are due from businesses next spring.