More on the Senate plan

In the property tax plan passed by the Senate early Monday morning, the complete revamp of the franchise tax is gone, replaced by a provision that repeals the franchise tax in 2008 and appoints a Business Tax Review Commission to make recommendations for a new business tax before the 2007 legislative session. The so-called Delaware-sub and Geoffrey loopholes are closed in the Senate bill as in the House bill. The Senate plan also eliminates the throwback provision of the franchise tax.
The Senate bill offers very modest property tax relief for the next two years, but drops the maximum rate to $1.10 thereafter leaving it up to future legislators to figure out how to pay for it. One of the reasons for the reduced property tax relief is the lower sales tax increase than the House plan offers: the Senate bill raises sales taxes only half a percent to 6.75%, compared to the House‘s 1% increase to 7.75%.
A comparison of the major provisions of the House and Senate plans is below. The two bills will be referred to a conference committee to work out the differences in the remaining nine days of the session.

Tax Provision

House Version

Senate Version

School Property Tax Rate

Max Rate 2006: $1.23

Max Rate 2007: $1.12

15% of future revenue growth set aside to further reduce maximum rate to ultimate $.75

Max Rate 2005: $1.30

Max Rate 2006: $1.25

Max Rate after 2006: $1.10

Local Enrichment Tax

$.15 if voter approved (phased in)

$.15 if voter approved (phased in)

Other Property Tax Provisions

Exemptions for culturally significant sites

Exemptions for rail facilities owned by rural transportation districts

Portable drilling rigs taxed I owners’ district unless in place more than one year

Drugs for disaster relief excluded

Portable drilling rigs taxed I owners’ district unless in place more than one year

Sales Tax

General sales tax rate increased from 6.25% to 7.25%

Car and boat rate increased from 6.25% to 7.35%

Car sales taxes at Standard Presumptive Value

Sales tax base extended to include:

   Computer programming

   Car repairs

   Bottled Water

   First $24 of monthly Internet access charges

Timely filer discount repealed

General sales tax rate increased from 6.25% to 6.75%

Car and boat rate increased from 6.25% to 6.75%

Car sales taxes at Standard Presumptive Value

Sales tax base extended to include:

   Computer programming repairs

Sales tax rebate for low income families

Tobacco Tax

Cigarette tax increased by $1.00 per pack

Other tobacco taxes increase 25%

Cigarette tax increased by $1.00 per pack

Other tobacco taxes increase 13.5% to 14%

Alcohol Tax

Changes mixed drinks gross receipts tax to itemized tax on sale of beverages

Alcohol taxes increased by 20%

Business Tax

“Delaware-sub” (partnership organization) and “Geoffrey” inter-company charges) loopholes closed

Tax credit for small business’ employees health care costs

“Delaware-sub” (partnership organization) and “Geoffrey” inter-company charges) loopholes closed

“Throwback” is repealed

FAS 109 earned surplus credit for newly taxed entities

New capital tax deduction for investments in subsidiaries

New sourcing provisions for real estate loans

Franchise tax sunset on Jan. 1, 2008

Business Tax Review Commission to recommend new business tax by Jan. 2007

Miscellaneous

Revenue from local government traffic tickets from red light cameras go to the state general fund

$4 admission tax to nude dance shows

New 10% gross receipts tax on radioactive substance storage

Study of tax effects of the bill to be performed by Comptroller

Authorization for electronic pull-tab bingo

This entry was posted in Uncategorized. Bookmark the permalink.

Leave a Comment

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s