Delaware Hits the Tax Jackpot
June 18, 2008
Congratulations to Delaware, which this week received an unexpected $63.3 million corporate income tax payment. The payment, equivalent to about 1.5% of Delaware’s $4.2 billion FY 2008 budget, was so surprising that state tax officials at first thought the wire transfer was intended for New York or California and mistakenly sent to Delaware. Instead, it was apparently the tax due for a gain on sale by a private entity liquidating its interest in a Delaware partnership. Now, Delaware’s top budget policymakers (the “Big Heads,” as they are awesomely called) are scrambling to revise the nearly-complete FY 2009 budget, so it will consume the newfound wealth.
Delaware is strongly reliant on its corporate income tax, taking in more per capita than any state except Alaska (which has outsized oil-related tax revenues) and New Hampshire (which has neither a sales tax nor a personal income tax). Indeed, it’s one of only five states to derive more than 10% of its budget from corporate income tax. While the arrival of such a windfall right before the closing of the budget process is unusual, wild swings in Delaware’s corporate tax revenues aren’t. In 5 of the last 20 years, Delaware’s corporate income tax revenues have fallen more than 10% from the previous year.
Source: US Census Bureau
So, Big Heads, enjoy your windfall, but try not to spend it all in one place: you might need it next year if the Corporate Tax Gods stop smiling on you.