Delaware Proposes Income Tax Hike on High Earners to Boost Education and Housing

In a bold move aimed at reducing economic inequality, Delaware Governor Matt Meyer has proposed a new budget that would raise state income taxes on the wealthiest residents to increase funding for education and affordable housing programs. The proposal is part of the governor’s broader fiscal plan to address long-standing budget gaps while expanding critical services for low- and middle-income families.

What’s in the 2025 Delaware Tax Proposal?

The budget, unveiled in March 2025, includes a provision to create a new tax bracket for high-income earners in Delaware. Though the specific income thresholds and tax rates have not yet been finalized, the plan is expected to:

• Raise income taxes on individuals earning above a certain threshold, likely targeting those making over $250,000 per year

• Generate tens of millions in new state revenue

• Allocate increased funding for public education, including teacher salaries and classroom resources

• Expand affordable housing programs across the state, particularly in high-need urban and rural areas

  
  

This is the first proposal in recent years where Delaware’s leadership has taken direct aim at the top earners to rebalance the state’s tax system.

Why Raise Income Taxes in Delaware?

According to the governor’s office, the motivation behind this tax proposal is twofold:

1. Closing the Wealth Gap – Delaware, like many states, has seen growing income inequality. This tax would require high earners to contribute more toward public services that benefit the entire state.

2. Investing in Critical Services – With rising housing costs and persistent challenges in teacher recruitment and retention, the governor is prioritizing sustainable funding for education and housing as pillars of long-term economic growth.

   
   

Potential Economic Impact

For taxpayers:

• Individuals below the new high-income threshold won’t see a change in their state tax liability.

• High-income earners may face a modest increase, depending on final legislation.

  
  

For public services:

• The Delaware Department of Education could receive a significant budget boost, used for teacher salaries, school infrastructure, and student support services.

• Housing assistance agencies may see expanded budgets to develop low-income housing units, assist first-time buyers, and combat homelessness.

  
  

What’s Next?

The proposal is expected to face robust debate in the Delaware General Assembly. While supporters praise it as a step toward tax fairness and social investment, critics argue that higher income taxes could discourage business development or drive affluent individuals to relocate.

The legislature has until June 30 to finalize the state budget for the 2025–2026 fiscal year. If passed, this would be one of the most progressive shifts in Delaware’s state tax policy in over a decade.

Stay tuned for updates as this Delaware tax reform bill progresses. Bizora will continue to monitor its impact on state tax planning, business strategy, and compliance.