Saturday, February 7, 2009

If Delaware became like Idaho...

... as much as I hate to admit it, we'd have closed the largest part of our State budget deficit.

Kilroy (damn his hide) got me thinking about this, with his proposal that a State sales tax be used to fund education.

I agree with the commenter that it would take one hell of a lot more balls than anybody in the General Assembly has to even propose such a consumption tax.

Besides, we'd have to repaint that Home of Tax-free Shopping sign.

But, for kicks and grins, I asked myself what would happen if the State just raised the Gross Receipts Tax, which is functionally a hidden sales tax.

If you have to have taxes at all, I like consumption taxes, because (a) I can choose not to consume; and (b) if we're going to take money from people at gunpoint, it might as well include all those tourists at the Beach who won't leave me a parking space.

But it turns out to be quite a lot of fun to discover what kind of revenue the State is actually collecting from the GRT (which is currently topped out just below 2%).

According to the Tax Foundation, Delaware ranks 49th out of 50 in sales/GRT tax receipts. Per capita, Delaware collects on $520 annually.

Should Delaware essentially double the GRT, bringing it up to 43rd in the nation (right around Idaho), my back of the matchbook calculation suggests it would bring in something on the order of $400 million in new revenue.

Probably half that money would be collected around Dover Downs on race weekends or outside Gus N Gus Hamburgers on the boardwalk, from people who don't live here.

Now I'd reduce that income forecast by 25% just to allow for the Recession itself and a negative impact on business revenues.

But the question of the day is: how much less a disaster would a $300 million shortfall be than a $600 million shortfall?

Besides, we could still keep lying to the tourists and telling them we have no sales tax.

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