In Fiscal Year (FY) 2011, Delaware collected $4.1 billion in state and local taxes. While this is an impressive sum of money, it tells us little about whether or not the average Delaware taxpayer can afford this level of taxation.
As shown in the charts below, Delaware’s state and local tax burden (tax collections divided by personal income) was the sixteenth highest in the nation for FY 2011 at 10.8 percent—or 2.7 percent above the national average of 10.5 percent. Delaware’s tax burden has grown over time by a whopping 96 percent to 10.8 percent in FY 2011 from 5.5 percent in FY 1950.
Delaware’s higher-than-average tax burden is driven by a very high individual income tax burden (3.2 percent, 5th highest), corporate income tax burden (0.9 percent, 4th highest), and all other taxes (4.8 percent, 4th highest). These taxes are offset by not having a general sales tax and a very low property tax burden (1.8 percent, 48th highest).
Of course, Delaware has long had a reputation for being an extremely attractive state for corporations to locate in thanks to a much better regulatory and legal environment. As such, Delaware earns significant revenue from the corporate income tax and corporate licenses (classified under “all other taxes”). However, most of these corporations do not have a significant presence in Delaware which means that the state “exports” many of these taxes onto other state’s residents.
We don’t currently make any adjustments for the movement of taxes across state lines, but the Tax Foundation does and they rank Delaware’s tax burden as the 26th highest in the country.
J. Scott Moody has nearly 20 years experience as a public policy economist with a specialty in tax policy and has over 180 publications. He has worked for numerous national and state-based think tanks such as the American Conservative Union Foundation, Federalism In Action, Tax Foundation, Heritage Foundation, and The Maine Heritage Policy Center.