For Delaware’s Biggest Corporations, It’s Better to Receive Than Give

January 11, 2017

The 149th session of the Delaware General Assembly began yesterday on January 10, 2017. It was in the first week of session last year that the House leadership sponsored and pushed through HB 235, the “Delaware Competes Act,” using an expedited procedure and rules suspensions to have the bill passed and signed before the public could comment on the proposal or even learn about it. That bill, along with SB 200 (introduced and signed within 14 days under a similarly expedited procedure), will cost Delaware taxpayers over $60 million a year (rising in subsequent years) in corporate welfare giveaways.

With a looming deficit of $350 million this year, the powers that be have taken to propaganda to dissuade the public from challenging these failed economic endeavors. While the editors of the News Journal waited three weeks to publish my article critical of economic policies that favor large giveaways to wealthy corporations, they used that time to round up opposing views that they have published every day since my article.

On Monday, an article by Tom Wagner appeared in the News Journal to imply that the “Delaware Competes Act” and the “Delaware Commitment to Innovation Act” saved some DuPont jobs. Like all of the Chamber of Commerce-sponsored missives that are now appearing in the News Journal subsequent to my article, this one draws completely erroneous conclusions from Auditor Wagner. The recent article shows either a distinct lack of knowledge of actual numbers (worrying coming from the State Auditor) or a deliberate attempt to propagandize Governor Markell’s and the Chamber of Commerce’s utter failure to adequately address Delaware’s economic plight.

Let me repeat very clearly for those late to the discussion or not aware of details in the matter. When DuPont announced the 1,700 layoffs of (six-figure salaries and up) research positions, I confronted Thomas Cook, Secretary of Finance, on three different public occasions. In our caucus meeting, in the committee meeting, and on the House floor, I asked basically the same direct question: “Are the 1,700 layoffs a fait-accompli and will any of those jobs be restored?” The answer was a resounding “No.” I then asked if the Delaware Competes Act or Delaware Commitment to Innovation Act would prevent any of the layoffs or restore any of those jobs, and the answer was once again, “No.” I asked if any other states that changed their corporate tax structure (in the manner they were proposing) saw an uptick in job creation, and the answer was basically not yet. When I asked if this new policy would stimulate job growth, the answer was, “We can’t say yet, but we hope it will.” These dialogues were in public, formal meetings.

Let me add one more little tidbit to expose the propaganda in the Wagner article. After the DuPont-Dow merger was announced and the three spinoffs, one being “Pioneer” seeds, were proposed, the end result was a complete cancellation of the Newark site construction project (for seed research facilities) and the movement of hundreds of research jobs to Iowa, while the DuPont loyalists in Delaware were left with keeping a headquarters in Wilmington that probably will never house more than 75 jobs (unless you count the privatized janitorial minimum wage jobs). So there you have it. The ugly reality of removing those rose-colored glasses on a sunshine-filled day.

Also note that the article’s headline reading “D is for Delaware and DuPont” omits the most important “D”—the “Dioxin pile” left by DuPont in the care of Chemours to eventually poison another “D,” the “Delaware River,” unless taxpayers pay to remove it.

Moving Forward

The bill I introduced last year (and in prior years) to raise the maximum corporate franchise tax cap should be the first order of business this year. Currently standing at $180,000 per year and used by nearly 2,000 of the very richest businesses incorporated in Delaware, it saves these wealthy corporations millions of dollars and the expense of having to calculate their franchise tax rate or pay a department to calculate it once they have been obligated for the maximum amount. Since 2009, I have sponsored legislation that, by increasing the maximum corporate franchise tax by $30,000 per year, would provide nearly $60 million (for each $30,000 cap increase) in additional revenue garnered from only these wealthiest of corporations. These corporations (that enjoy using the cap) have admitted that this would not be an undue or unaffordable burden on them. In 2009, the nearly 2,000 corporations availing themselves of this cap had a minimum stock asset value of over $660 million.

I intend to file this legislation again this year with a reasonable cap raise that would max out the corporate franchise tax obligation at $240,000 per year (a $60,000 cap increase) and consequently yield approximately $120 million in revenue, which would blunt the $60 million (and counting) loss of revenue due to the “Delaware Competes Act” and the “Delaware Commitment to Innovation Act” (passed in the opening days of last session in a hastily contrived effort to offer more corporate welfare). Rep. Kim Williams and I were the only two votes against these farcical attempts to grow Delaware’s economy. I hope the other 60 legislators are now prepared to recover some of their overly-exuberant generosity toward the wealthiest corporations on the planet.

The looming deficit in our State is a product of irresponsible economic policies by outgoing Governor Markell and the leadership in the General Assembly. The State has given away over $250 million under Markell’s governorship, with well over one-third of that going to only six Fortune 500 companies. If we instead used those millions to support local businesses and infrastructure investments, we could ensure a healthy and robust growth for our local communities rather than another payday for corporate profiteers.

We have an opportunity to create a sustainable and balanced budget by raising the corporate franchise tax, freezing the millions of dollars available to the DEDO Strategic Fund, and dedicating money to local businesses in the form of tax cuts and incentives for job creation and local business expansion.

We must balance the budget responsibly and not succumb to corporate extortion. Please call your legislators and demand that they end their flawed attempts to redistribute revenues from Delaware families into the coffers of wealthy corporations.

John Kowalko
State Representative
25th District