House Bill Would Help Modest Income Delawareans Keep More of Their Earnings

The authors of a new measure in the State House of Representatives say it will help Delaware’s working families avoid having their earnings unfairly taxed at higher rates. 

House Bill 278, sponsored by State Rep. Rich Collins (R-Millsboro) and State Sen. Dave Lawson (R-Marydel), would require the state’s personal income tax brackets to be annually adjusted for inflation.  

Rep. Collins said Delaware’s income tax inflexibility hurts low- and moderate-income Delawareans the most. Of the state’s six graduated income tax brackets, four set rates on annual earnings between $2,000 and $25,000. Each segment of income is taxed at the rate of the bracket into which it falls.

“The value of cost-of-living raises earned by low- and moderate-income Delawareans is being eroded by our state’s rigid tax system,” Rep. Collins said. “Wages growing in recognition of inflation are being taxed at higher rates as those earnings are pushed over static tax bracket thresholds. It amounts to state theft by inefficiency.” 

Sen. Lawson agreed that inflationary ‘tax bracket creep’ hits working Delawareans the hardest. “Our tax rates should keep pace with inflation to maintain balance and equity with wages,” he said. “Working families facing higher expenses need every dollar to which they’re entitled, especially at a time when the cost of essentials is rapidly rising.” 

Under the measure, Delaware’s income tax rates would be adjusted annually by an amount equal to the change in the Consumer Price Index prepared by the Bureau of Labor Statistics for urban consumers. If enacted, the legislation would take effect at the start of 2023. 

The bill is pending action in the House Revenue & Finance Committee.