‘Every dollar counts’: Critics say plan to increase fees, taxes and tolls will disproportionately hurt poor Delawareans

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Low-income Delawareans will likely feel a greater pinch to their pocketbook from legislation raising motor vehicle fees headed to Gov. Matt Meyer’s desk. The bill, along with a proposed cigarette tax increase and planned toll hikes, has critics and tax experts warning the state’s agenda to increase fees and taxes will disproportionately hurt the state’s most vulnerable residents.

The move to increase taxes, fees and tolls comes after the Delaware Economic and Financial Advisory Council announced in May that lawmakers had an additional $98 million in revenue for the next fiscal year’s budget.

A bill sponsored by state Rep. Eric Morrison, D-Newark, would raise Department of Motor Vehicle fees, including for a driver’s license, state identification cards and dealership license. The most significant increase is the vehicle documentation fee, which would go from 4.25% to 5.25%.

State Rep. Madinah Wilson-Anton, D-Newark, opposed the legislation when the House passed it last week. She said it’s a regressive tax, meaning most of the cost burden would land on the less fortunate. She argued it will make it much more expensive to buy a car, a view also echoed by some House Republicans.

“When you are on the poverty line, you are disproportionately impacted by fines and fees and all of these types of things,” she said. “It’s Delawareans like that that I think of when I choose not to support legislation like this, because I know every dollar counts.”

The document fee is what a dealership charges to cover the cost of processing the paperwork involved with the purchase of a car and is set by state law. The bill’s fiscal note said the hike would generate an additional $35 million in revenue, with the entire bill creating about $39 million in total.

Morrison said the new document fee proposed in his bill would still be lower than surrounding states, including Pennsylvania and New Jersey. He said that the hikes were necessary due to declining revenue from motor fuel tax because of electric vehicles and more fuel-efficient cars.

The state Department of Transportation “simply would not have the money this coming fiscal year to do a lot of the most basic things it does, including paving, bridges, things in communities, mowing, all kinds of things constituents expect,” he said.

DelDOT has proposed higher toll prices, which does not require action from state lawmakers.

The plan has those from out of state bearing the biggest burden. Route 1 would see toll increases at both the Biddles, south of Roth Bridge, and Dover toll plazas, with Delaware E-ZPass users expected to see a jump of 50 cents on weekdays to $1.50 at both plazas, and a rise of $1 on weekends to $4. Out-of-state E-ZPass and cash users will pay $2.50 weekdays at each plaza, up from $1.50. The price goes up from $3 to $6 on weekends. The agency has said the fee increases will likely kick in around October. DelDOT Secretary Shanté Hastings said the toll price increases will bring in $22 million for I-95 and $39 million for Route 1.

House Speaker Melissa Minor-Brown, D-New Castle, has introduced a bill that would raise cigarette taxes from $2.10 to $3.60. Taxes also go up on vapor products, chewing tobacco and other tobacco products. Minor-Brown did not respond to multiple attempts by WHYY News to discuss the measure, which is in committee.

Miles Trinidad, a state analyst for the Institute on Taxation and Economic Policy, a nonprofit, nonpartisan tax policy organization, said flat fee increases like the document fee and the cigarette tax are regressive and will hurt low-income Delawareans.

“Someone who has to pay a $75 registration fee for a vehicle, and they make less than $30,000, that is a bigger bite of their paychecks, the ability to put clothes on their back, ability to put food on the table, compared to someone who makes $300,000,” he said. “So even though there’s these minor hikes on vehicle registration fees or small increases in cigarette and tobacco products or anything else they may consider, that’s more of a consumption tax. With less income, they’re much harder hit.”

Some progressive lawmakers have been urging their fellow colleagues to support restructuring the state personal income tax brackets, where currently the top rate kicks in at $60,000.

Earlier this year, Gov. Matt Meyer proposed adding additional personal income tax brackets as part of his “budget reset” as a way of raising additional revenue for his budget priorities. At the time, his administration said the state could raise an additional $16.5 million in personal income revenue in 2026 and $35.2 million in 2027.

Trinidad praised the governor’s March proposal earlier this month as a way to confront federal spending uncertainties, saying the top 1% would see the most of the tax increase. An ITEP analysis shows the top 1% of Delaware taxpayers pay 6.8% of their income in total state and local taxes — the lowest of any income group in the state. The lowest 20% pay 8.2% and the middle 20% pay 7.9% of their income in taxes.

“This would build a more robust and sustainable income tax while helping to ensure that wealthy individuals start contributing their fair share to the public services that benefit all Delawareans,” he said in a June 4 blog post.

Last month, Speaker Minor-Brown threw cold water on comprehensive personal income tax reform this legislative session at a Delaware State Chamber of Commerce event.

A statement from House and Senate leaders after the joint budget writing committee drafted the fiscal year 2026 budget acknowledged looming threats of federal spending cuts.

“To that end, Senate and House leadership will be working throughout the summer to modernize our income tax code as part of a broader effort to balance Delaware’s long-term fiscal stability while sustaining our investments in critical public services,” it said.

Still, progressives attempted to push a last ditch effort this week to make changes to personal income tax brackets.

The House Revenue and Finance Committee, chaired by Wilson-Anton, held a hearing on a bill, sponsored by Dover Democrat state Rep. Sean Lynn, that would create three additional tax brackets for taxable income above $60,000, while slightly reducing the tax rate for people making under $60,000. He said the bill was generally revenue neutral.

“This bill differs from previous iterations of the bill, insofar as it’s not designed to generate revenue,” Lynn said. “We all believe that it would be in poor taste, given recent DEFAC projections, to introduce a bill that generates revenue. This bill is solely designed to give relief for 90% or more of Delawareans who are currently struggling.”

The legislation would give back about $58 to individual taxpayers making below $60,000.

Republicans and representatives of business groups argued the bill would hurt small businesses and the middle class.

“I’ll just say, as someone who grew up with a single mom who would have only gotten the $58 of relief, one of the things we got to talk about in the building overall is, how do we give the best relief?” said state Rep. Mike Smith, R-Pike Creek. “I also think of what it means to be middle class nowadays as well, and it’s become way more expensive.”

The legislation failed to garner enough support to make it out of committee.

Rep. Morrison said he wouldn’t support the cigarette tax bill without movement on tax brackets legislation that makes the wealthy pay more.

“I’m not going to support a sin tax bill that is going to disproportionately affect people in the lower socioeconomic end of the spectrum, if we’re not willing to do the right thing with the personal income tax bill,” he said.

Also heading to Gov. Meyer’s desk is legislation that increases fees for the Delaware Department of Natural Resources and Environmental Control. It will bring in more than $7 million in revenue by largely raising licensing and permitting fees for businesses. It doesn’t raise state park entrance fees or permits for hunting or fishing.

A spokesperson for Meyer did not directly address concerns about the fees disproportionately hitting lower-income Delawareans. Director of Communications Mila Myles said that while the governor remained committed to a more equitable tax structure, he believes the fee hikes are necessary to invest in state services and make improvements to roads, bridges and parks.

This story was supported by a statehouse coverage grant from the Corporation for Public Broadcasting.