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Del. House approves making tax increases permanent

Randall Chase, Associated Press

DOVER, Del. (AP) -- Delaware's House on Thursday approved a series of proposals by Democratic Gov. Jack Markell to make several recession-era tax increases permanent.

The tax increases were approved in the Democrat-controlled House along party line votes, with Rep. John Atkins of Millsboro, a former Republican, the only Democrat to join GOP lawmakers in voting against the measures.

Democrats argued that the tax increases are needed to ensure stable revenues as Delaware continues a slower-than-expected economic recovery.

"We need the money. We need the stability," Rep. John Kowalko, D-Newark, said in defending a proposal to make a 2009 increase in the corporate franchise tax permanent.

Republicans argued that lawmakers were reneging on their assurances to Delaware taxpayers in 2009 that the tax increases, some of which have been modified, would expire after four years.

"These people that you're sending a message to ... I guess now they're thinking we don't take our votes seriously," Rep. Deborah Hudson, R-Wilmington, said in arguing against a permanent hike in the top marginal personal income tax rate, from 5.95 percent in 2009 to 6.6 percent.

GOP lawmakers also argued that the tax bills were premature, given that the legislature was still in the early stages of drafting a budget and that the independent panel that sets the state's official revenue forecast will meet three more times before lawmakers vote on a budget in late June.

"This is highly unusual," said Rep. Joe Miro, R-Newark. "... I just don't see the reason why we're doing this so early."

But Democrats argued that legislative budget writers need certainly as they make plans to mark-up Markell's budget proposal, and that the state's economy remains fragile.

"No one expected for this downturn to last for more than four years," said state finance secretary Tom Cook, the administration's point man on the tax proposals.

Cook also argued against GOP proposals to simply extend the 2009 tax increases for another year or two rather than making them permanent, suggesting the state might just end up creating another fiscal cliff to deal with later.

Under the legislation approved Thursday, the maximum corporate franchise tax would remain at $180,000, up from $165,000 in 2009.

The top personal income tax rate would drop from the current 6.75 percent for incomes above $60,000 to 6.6 percent, but it would remain higher than the 2009 rate of 5.95 percent.

The gross receipts tax on most businesses would be permanently increased compared to 2009 but would drop 1 percent from the current rate. The rate for manufacturers would decrease by 30 percent from the current rate in an effort to boost the state's sluggish manufacturing sector.

The estate tax that was revived in 2009 also would be made permanent, but with a higher threshold.

The tax bills now move to the state Senate for consideration.