Party triumphed this year, but tax increases will cause 2012 uprising
DELAWARE VOICE • By JOHN E. STAPLEFORD • November 14, 2010
Original Source:
http://www.delawareonline.com/article/20101114/OPINION07/11140305/1004/OPINION/Tide+will+soon+turn+on+Democrats+in+Delaware
While much of the nation swung toward the Republicans in the recent election, here in Delaware congressional, statewide and local elections overwhelmingly favored Democrats.
While the determinants of the congressional vote can be debated, Delaware voters have given Democrats increased control over the state Legislature. The Democratic majority in the Delaware Legislature not only remained but is now so large that any bill can be passed without any negotiations with Republicans.
It is an interesting outcome and raises the question, "Why didn't the voters of Delaware follow the national trend of expressing outrage at the current state of affairs?" This can be asked of both statewide and local races, and is evidenced not because Democrats won, but rather because the current majority remained in power regardless of which party it happened to be. Surprisingly, the answers are straight-forward.
First, Delaware residents are not paying the real bill for the runaway state and local government spending that has occurred over the past decade. Delaware exports 44 percent of its state and local tax burden, ranking fifth among all the states in being able to successfully shift the state and local tax burden out of state.
In addition, the state of Delaware has held taxes down by running up debt. Over the last decade, Delaware has gone from the middle of the pack on debt per capita to the fifth-highest among all states. State debt has doubled over the past seven years.
Not to mention the fact that local property taxes are kept low because public education is funded primarily at the state level. Delaware has the third-lowest property taxes as a percentage of median home value among all the states.
Finally, the Delaware residents who vote are not the folks most affected by the current economic hard times. While the recession has not hit Delaware as hard as many states, it has been very tough on groups whose voter participation rates are typically low: the poor, people with less education and the young. Counter to that, the voter participation rate for government employees is typically high. AFSCME and the teachers union have been very involved in this election cycle in Delaware.
Will the tide turn?
Yes. During the next two years, state and local taxes that affect Delaware residents and the Delaware economy are going to rise. The reasons for this are many. First, the federal stimulus money dries up in 2011. Second, state and local governments in Delaware can't shift operating expenses into debt much more without affecting their bond ratings.
Third, the majority party in control of the Legislature is not naturally inclined to cut spending, and the unions will work to make sure that the Legislature does not modify pension benefits nor address the unfunded health care liability of over $5 billion.
Fourth, the over-65 resident population in Delaware is going to explode. These folks are on fixed incomes and perceive themselves to be hard-pressed. They will be very upset with any state and local tax increases, and their voter participation rates are typically very high.
Finally, with the passage of the Dodd-Frank financial reform bill, the door has been opened for the pre-emption of Delaware corporate law and a shift of governance to the national level, with new requirements such as "say on pay" and jurisdictional changes. This will cripple the state's ability to export its tax burden.
So, there is a logic to the recent state and local elections in Delaware, and it will be interesting to watch over the next year and see how these issues are dealt with.
John E. Stapleford is director of the Center for Economic Policy and Analysis at the Caesar Rodney Institute.
Click below for the Original Source:
http://www.delawareonline.com/article/20101114/OPINION07/11140305/1004/OPINION/Tide+will+soon+turn+on+Democrats+in+Delaware
