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COMMENTARY: A smarter economic pathway for Delaware

A smarter economic pathway for Delaware

Dace J. Blaskovitz and Dr. John E. Stapleford | 2/19/2016

With a budget battle about to begin, what does the data suggest as the direction Delaware should take?
Let’s start with a quick look back and compare the year 2005 to the year 2015.
Since 2005 Delaware has added a total of 12,000 jobs. This is an employment growth rate of three-tenths of a percent per year (0.3 percent). The unemployment rate has risen from 4.1 percent to 4.8 percent and the percent of the adult population participating in the labor force has dropped from 67 percent to 63 percent.
Over the same 10 years, Delaware per capita income has gone from 7 percent above the nation’s to exactly equal to the nation’s. The inflation-adjusted growth rate in Delaware per capita income has been 0.34 percent per year. The Delaware individual poverty rate has jumped from 8.5 percent to 13.7 percent.
Might the Delaware economy done better? State-level data from the American Legislative Exchange Council indicates “yes.”
A simple comparison of the 10 states with the best economic outlook to the 10 states with the worst economic outlook is instructive.
The simple average top marginal personal income tax rate in the best-outlook states is 3.7 percent, including both state and local income taxes, compared to 8.7 percent in the states with the worst outlook. Delaware’s current rate is 7.85 percent.
Similarly, the average top marginal corporate income tax rate is 4.1 percent vs. 10 percent, with Delaware registering 10.35 percent.
The industrial electricity rate in the top states is 6.12 cents per kilowatt hour compared to 8.5 cents in the bottom states, with Delaware sitting at 8.1 cents.
None of the top states levy an estate tax, and 80 percent of the bottom states do. Delaware reinstated its estate tax a few years ago.
All of the top states have a Right To Work law while none of the bottom states do. Delaware does not have a Right To Work law. West Virginia just became the 26th state to enact a Right To Work law.
So, it is not rocket science to improve a state’s economy. Lower personal and corporate income tax rates, competitive industrial electricity rates, no estate tax, and paycheck protection (a Right To Work Law).
The political class often crows about “The Delaware Way.” Unfortunately, the numbers tell us that’s the wrong way. Instead, the pathway to economic stability exists, and it is clearly identified.
Editor’s note: Dace J. Blaskovitz and Dr. John E. Stapleford are both directors for the Center for Economic and Policy Analysis, whose findings are published by the Caesar Rodney Institute.


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