NEW CASTLE, Del. (AP) - Spikes in corporate franchise and income taxes projections boosted Delaware’s official revenue estimates Monday as the Markell administration fashions a budget proposal for the upcoming fiscal year.
The Delaware Economic and Financial Advisory Council, which sets the official projections used by budget writers, increased its revenue estimate for the current fiscal year by $88 million compared to its September forecast.
The council’s revenue estimate for fiscal 2017, which starts July 1, increased by $79 million, even after members trimmed an initial staff estimate by $7 million because of expected job cuts and the resulting drag on personal income taxes from the DuPont Co.’s recently announced merger with Dow Chemical.
Estimated net corporate income taxes for fiscal 2016 increased by $58 million from September, while estimated net corporate franchise taxes increased by $26 million. The corporate income tax estimate for fiscal 2017 grew by $29 million, while the franchise tax estimate rose by $31.5 million compared to September’s numbers.
“The corporate sector’s sort of coming to our rescue here,” said Ken Lewis, chair of DEFAC’s revenue subcommittee.
Monday’s revision brings the total estimated revenue for the upcoming fiscal year to just over $4 billion.
Gov. Jack Markell’s budget office will use the latest numbers in finishing up a 2017 budget proposal, which he will present to lawmakers when they convene next year’s legislative session in January.
But state officials and lawmakers noted that the corporate income tax is an extremely volatile source of revenue that can fall as quickly as it rises.
“That means that, while we are pleased to have a better financial picture moving into the budgeting process for fiscal 2017, we cannot declare victory and say that our work is done,” Democratic House majority leaders said in a prepared statement.
Senate Republicans also sounded a note of caution.
“I’m pleased to hear that our private sector is doing better than expected. If these projections hold up, it should give the General Assembly an opportunity to shore up some of our long-term structural challenges,” said Senate Minority Leader Gary Simpson, R-Milford. “I’m concerned, however, about the volatility in the projections, especially given the uncertainty surrounding the Dow-DuPont merger. We should celebrate today’s news, but tread lightly until the situation is more concrete.”
Meanwhile, state finance secretary Tom Cook said corporate income tax payments that were due Dec. 15 were significantly higher than expected.
“It came in much higher than we anticipated. … We saw a lot of positive activity,” he said.
Cook also said DEFAC members did the right thing in recognizing the potential negative effect on personal income tax revenue from the Dow-DuPont merger, which Lewis, the revenue subcommittee chair said was “a very real consideration for 2017.”
“We do think it’s important to put a marker down,” said Lewis, adding that the downward revision was based on projections of 700 job cuts in Delaware.
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