DELAWARE'S
$410 MILLION MISTAKE
How Governor Meyer Chose Politics Over
Delaware's Economic Future
"The Signature That Made Delaware the Worst State in America to Run a Corporation"
Governor Matt Meyer signs House Bill 255, decoupling Delaware from 68 years of federal tax conformity.
Delaware business groups warned him this would drive companies away. He signed it anyway.
Delaware's $410 Million Mistake
How Governor Meyer Chose Politics Over
Delaware's Economic Future
By Karen Hartley-Nagle
Former President, New Castle County Council (2016–2024)
December 21, 2026 [Updated January 21, 2026] | A Truthline Investigative Report
Res ipsa loquitur.
The thing speaks for itself.
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Truthline Summary
Delaware's $410 Million Mistake:
How Governor Meyer Chose Politics Over Delaware's Economic Future
By Karen Hartley-Nagle | Truthline Investigative Report | December 21, 2025 | Updated January 21, 2026
On December 15, 2025, Delaware's own financial advisors confirmed what Governor Meyer does not want you to know: House Bill 255 extracts $365 million from Delaware businesses by forcing them to delay tax deductions they are legally entitled to take immediately.
The Tax Foundation now ranks Delaware dead last among all 50 states for corporate tax treatment. Meyer had nearly $1 billion in reserves to manage a temporary budget timing issue. Instead, he broke 68 years of predictable tax conformity policy to make a three-year spreadsheet look better.
This report shows you the real numbers, the exposed evidence, and the long-term cost to Delaware's economic future.
TABLE OF CONTENTS
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Musk and Meyer [Images / Link Strip]
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Summary | The Bottom Line | Full Context | [Quick Overview 3-Tab Box]
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I.
Executive Summary
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II.
Delaware's $410 Million Mistake: How Governor Meyer Chose Politics Over Delaware's Economic Future
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III.
The Week Delaware Broke Trust: A Timeline of Contradiction
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IV.
November 19 to December 15: From Signing to Confirmation
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V.
Deconstructing Maxwell’s Math: What “$328 Million Saved” Actually Means
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VI.
The Real Cost: Time Value of Money
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VII.
October 20, 2025: The DEFAC Meeting That Started It All
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3D Carousel [PDF's, Snapshots, and Images]
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VIII.
While Delaware’s Courts Fix Their Mistakes → Meyer Doubled Down on His
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IX.
Delaware's Competitive Ranking Just Collapsed
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X.
While Delaware’s Courts Fix Their Mistakes → Meyer Doubled Down on His
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XI.
The Merck Contradiction: $30 Million for Giants → Taxes for Everyone Else
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XII.
The Two Delawares: Grants for Giants Taxes for Everyone Else
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XIII.
The Dexit Accelerator: 50+ Companies and Counting
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XIV.
Delaware's Competitive Ranking Just Collapsed
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XV.
The Real Structural Crisis: Medicaid
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XVI.
Mid-Sized Businesses Get Stuck with the Bill: Two Institutions, Two Messages, One Disaster
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XVII.
Meyer's Response: Deflection, Distortion, and Denial
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XVIII.
How Tax Differentials Actually Drive Location Decisions
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XIX.
The Path Not Taken: Real Fiscal Leadership
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XX.
Two Delawares: The Path Chosen vs. The Path Rejected
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XXI.
The Budget Reality: We Could Have Afforded the Right Choice
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XXII.
The Spending Problem Nobody Wants to Discuss
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XXIII.
The Spending Counterfactual
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XXIV.
The Operating Deficit DEFAC Revealed
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XXV.
DEFAC's Static Scoring vs. Economic Reality: The Budget Reality → We Could Have Afforded the Right Choice
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XXVI.
The Operating Deficit DEFAC Revealed
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XXVII.
The Two Delaware's Grants for Giants → Taxes for Everyone Else
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XXVIII.
The Small Business Lie: What Delaware Actually Offers
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XXIX.
The Innovation Economy Lie
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XXX.
By the Number: Meyer's Two-Tier Economy
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XXXI.
The Bottom Line: Politics Over Economics
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What to Watch for: If This Report Is Correct Expect This to Happen [Slideshow]
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XXXII.
The Evidence File: Receipts, Sources,and Primary Document
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XXXIII.
Appendix, Supplemental Report Documents, and Explainers [PDF's]
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Attribution: How to Cite This Report
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Information Strip [Four Articles, Images, Links]
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Timeline
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Footer | Support the Truthline Network | Get the Truthline Briefing
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"Meyer had nearly $1 billion in reserves. He chose not to use them"
I. Executive Summary
The Central Finding: HB 255 addresses budget optics, not fiscal structure. It improves near-term spreadsheets
while degrading Delaware’s competitive standing and deferring the reforms the state requires. Governor Matt Meyer’s House Bill 255 represents the most significant departure from Delaware’s business-friendly tax policy in
68 years. This was a choice. Not a necessity. Not an emergency. A choice. Governor Meyer looked at a $410 million timing problem, looked at $980 million in reserves designed for exactly this purpose, and decided that extracting money from businesses was easier than making hard decisions about spending. Every Delaware governor for 68 years chose differently. Meyer chose politics. This report documents how Meyer chose short-term political accounting over long-term fiscal responsibility, breaking Delaware’s conformity with federal tax code to avoid making hard budget decisions, despite having nearly $1 billion in reserves designed precisely for such volatility.
"Meyer had the reserves. He had the tools. He had 68 years of precedent.
He chose extraction over leadership. That choice will cost Delaware for decades."
Key Findings: HB 255 extracts approximately $294 million in direct Corporate Income Tax revenue through FY2028 by forcing businesses to delay legitimate deductions. Delaware was already ranked 50th out of 50 states in corporate tax competitiveness before HB 255 passed, this bill made a bad position worse. Delaware faces a structural operating deficit of $361.4 million in FY2026, spending far more than it collects. The state is operating at 98.6% of its constitutional appropriation limit with virtually no fiscal headroom, Medicaid costs growing at 10-12% annually represent the true structural crisis, the OBBBA timing issue was a convenient distraction.
Core Thesis: HB 255 is political accounting masquerading as fiscal policy, it makes the budget spreadsheet look better while eroding Delaware’s competitive position and avoiding the structural reforms the state actually needs.
"Governor Matt Meyer just made Delaware the worst state in America to run a corporation, and he did it to avoid making hard budget choices."
III. The Week Delaware Broke Trust: A Timeline of Contradiction
The week of November 10-19, 2025, will be studied by corporate law scholars for decades. In that single week, Delaware demonstrated that it could hold two contradictory positions simultaneously, and expect the business community to believe both.
November 12, 2025: Coinbase, an $82 billion cryptocurrency exchange, files with the SEC to reincorporate from Delaware to Texas. Chief Legal Officer Paul Grewal writes in the Wall Street Journal: "It's a shame that it has come to this, but Delaware has left us with little choice."
November 13, 2025, Morning: The Delaware House of Representatives changes its rules to allow virtual voting during special sessions. The explicit purpose: ensure enough votes to pass HB 255.
November 13, 2025, Afternoon: The House passes HB 255, breaking Delaware's 68-year tradition of federal tax conformity.
November 19, 2025: Governor Matt Meyer signs HB 255 into law.
Consider what the business community witnessed that week. Delaware's courts were cited as the reason for a major corporate departure. Delaware's legislature changed its own rules to pass a bill. Delaware's governor signed legislation that the State Chamber of Commerce, the Business Roundtable, the BioScience Association, and the Society of CPAs had publicly opposed.
You cannot send both messages and expect the business community to trust either one.
That is the real cost of the week Delaware broke trust. And it will compound for decades.
"November 10-19, 2025. In one week, Delaware broke 68 years of tax conformity, changed its own rules to pass the bill, and watched an $82 billion company walk out the door. That was the week Delaware broke trust."
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IV. November 19 to December 15: From Signing to Confirmation
The Governor signed first. The state counted second. That sequence tells you everything. At the December 15, 2025, DEFAC meeting, nearly a month after Governor Meyer signed HB 255 on November 19, state officials updated projections to reflect the bill's actual impact.
And even getting to that signing required procedural manipulation. On the morning of November 13, House Democrats changed their rules to allow virtual voting during special sessions. The purpose was explicit: ensure enough votes to pass HB 255. Two Democratic representatives defected and voted against the rule change. Republican Rep. Rich Collins put it plainly: 'We're only doing this because we need to pass a bill with a three-fifths majority required. And you know you can't pass it without doing this.' Collins called it corruption. Whatever you call it, the rules were changed to pass the bill. That is not consensus. That is desperation with a quorum.
The numbers confirmed what business leaders had warned: HB 255 would extract $365 million from Delaware businesses and rank Delaware 50th out of 50 states in corporate tax climate. Dead last. Behind every state that competes with Delaware for business. Behind states that never claimed to be business-friendly at all.
"At the December 15, 2025, DEFAC meeting, state officials updated projections
to reflect House Bill 255's passage. The numbers told the whole story:
$365 million extracted by forcing deduction delays."
The numbers told the whole story:
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October projection (before HB 255): FY26 corporate income tax of $278.5 million
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December projection (after HB 255): FY26 corporate income tax of $413.3 million
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Difference: $134.8 million added back to FY26 alone by denying businesses immediate deductions
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Total through FY28: Approximately $365 million extracted by forcing deduction delays
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Brian Maxwell, Director of the Office of Management and Budget, told DEFAC the state "saved an estimated
$328 million through Fiscal Year 2028."
DEFAC Document Verification: The December 2025 DEFAC Revenue Worksheet confirms the following direct
three-year Corporate Income Tax impact from HB 255’s deduction delays:
Brian Maxwell’s statement about “saving $328 million through FY2028” includes effects beyond Corporate Income Tax alone. Both figures, $294 million in direct CIT impact and $328 million in total fiscal impact, underscore the same conclusion: Delaware extracted hundreds of millions from businesses to avoid fiscal discipline.
Source: Delaware Economic & Financial Advisory Council, December 2025 Revenue Worksheet, pages 1-2
Budget Director Brian Maxwell told DEFAC the state "saved $328 million through FY2028."
Saved. That's the word he used. "Write that word down. Remember it. Because in Trenton, they call it revenue. In Dover, they call it savings. In the real world, when you take money that isn't yours to cover bills you chose not to pay, there's another word for it."The state didn't save anything. It took money from businesses to cover spending it refused to cut.
"Delaware didn't 'save' anything. The state forced businesses to
spread legitimate investment deductions over multiple years instead
of taking them immediately as federal law allows."
Delaware didn't "save" anything.
The state forced businesses to spread legitimate investment deductions over multiple years instead of taking them immediately as federal law allows.
Those deductions don't disappear, they're just delayed, creating:
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Dual compliance systems, businesses must now keep separate books for federal and Delaware taxes
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Cash flow disadvantages for companies investing in R&D, equipment, and expansion
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Competitive disadvantage versus states that maintained federal conformity
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Policy uncertainty, HB 255 expires in 2030, creating future unpredictability
"The Administration claimed a $410 million crisis.
Their solution recovered $328 million. The missing $82 million?
That is the gap between the story they told and the math they did."
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V. Deconstructing Maxwell’s Math: What “$328 Million Saved” Actually Means
Brian Maxwell’s $328 million figure deserves scrutiny because it reveals the true breadth of HB 255’s impact, far broader than the Administration acknowledges.
The breakdown:
The $34 million personal income tax component reveals something Meyer doesn’t mention: HB 255 doesn’t just hit “large, out-of-state corporations.” It also extracts money from:
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Delaware small business owners structured as S-corporations
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Partners in local law, accounting, and consulting firms
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Family businesses operating as partnerships
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Real estate investors using pass-through entities
These are precisely the “Delaware families” and “small businesses” Meyer claims to protect. The math proves otherwise.
Now watch the math. Because the math is where the story falls apart. Furthermore, note the discrepancy between the “crisis” and the “solution”:
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Pre-HB 255 claimed “loss”: $410.1 million over three years
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Post-HB 255 claimed “savings”: $328 million over three years
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Gap: $82.1 million
What happened to the other $82 million? Either the “crisis” was overstated, HB 255 doesn’t capture everything it claimed to, or the Administration is using different methodologies for different political purposes. All three explanations lead to the same place: the Administration's numbers cannot be trusted. Pick your reason. The conclusion doesn't change.
In any case, Maxwell’s own number confirms that HB 255 extracted at least $328 million from Delaware businesses, and at least $34 million of that came from Delaware’s own small business owners and professionals, not “large,
out-of-state corporations.”
Sources: DEFAC Revenue Worksheet (December 2025); Delaware House Democrats Press Release (November 5, 2025);
Brian Maxwell statement at DEFAC meeting (December 15, 2025); Delaware Business Times reporting (December 15, 2025)
"Michael Houghton, eight-year DEFAC member, voiced concerns: If you're a
business and you're losing what you would see as the time value of money
by the acceleration of the deduction, that's something people have a view on.'"
The Administration's own advisors saw the problem. They said so, on the record, in public. Even DEFAC member Michael Houghton, an eight-year council veteran, voiced concerns during the December meeting: "If you're a business and you're losing what you would see as the time value of money by the acceleration of the deduction, that's something people have a view on. Is it a good thing to decouple, considering what the environment is?"
"HB 255 creates dual compliance: one set of books for federal taxes,
another for Delaware. For companies operating in multiple states,
Delaware just became the most administratively burdensome jurisdiction."
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VI. The Real Cost: Time Value of Money
Consider a biotech company investing $10 million in R&D:
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Federal tax benefit (with OBBBA conformity): Immediate $2.1M (21% × $10M)
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Delaware benefit with full conformity: Immediate $870K (8.7% × $10M)
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Delaware benefit with HB 255 decoupling: $870K spread over 5 years
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Net Present Value loss at 5% discount rate: ~$188K per $10M invested
"You cannot count the jobs that were never created.
But they are the real cost of HB 255, and Delaware will pay it for a generation."
The Bottom Line:
For a company with $100M in annual R&D, that's $1.88 million in NPV loss annually. That's real money delayed, actual reduced cash flow for investment, hiring, and growth.
Meyer just made it $1.88 million more expensive to innovate in Delaware.
Methodological Note: This analysis uses a 5% discount rate, which may actually understate the true cost of capital
for growth companies. Venture-backed biotech and technology firms typically face cost of capital in the 8-12% range, meaning the real NPV loss for R&D-intensive companies could be 60-140% higher than the $1.88 million figure presented here. For a high-growth company with $100M in annual R&D using a 10% discount rate, the annual NPV loss approaches $3.2 million.
"For a company with $100M in annual R&D,
that's $1.88 million in NPV loss annually. That's real money delayed,
actual reduced cash flow for investment, hiring, and growth.
Meyer just made it $1.88 million more expensive to innovate in Delaware."
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VII. October 20, 2025: The DEFAC Meeting That Started It All
Let's start with the actual numbers, not the political spin, but what DEFAC, Delaware's independent board of financial advisors, reported on October 20, 2025.
The One Big Beautiful Bill Act (OBBBA) changed federal corporate tax rules to allow immediate expensing of research and development costs and accelerated depreciation.
"The warnings were explicit. The opposition was bipartisan.
The data was public. Meyer signed anyway. This was not a mistake of ignorance.
This was a mistake of choice."
Because Delaware has "rolling conformity", meaning our tax code automatically mirrors federal changes, those provisions would flow through to state returns.
DEFAC's October forecast showed the impact:
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FY 2026 corporate income tax: down $155.1 million (-38.4%) from June projections
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FY 2027 corporate income tax: down an additional $169.7 million (-8.7%)
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Total three-year impact: approximately $410 million
"Delaware's revenue forecaster David Roose: 'The revenues would've been positive.
Current projections would've been about $300 million higher.' Translation: Without federal policy changes that incentivize business investment, Delaware's corporate
tax collections would have grown. The 'crisis' was entirely about whether
Delaware would match Washington's pro-investment policy."
Here's the crucial context DEFAC made clear: corporate income tax represents only about 5% of Delaware's
$6.8 billion budget.
This wasn't a structural crisis, it was a timing issue. Companies would take deductions earlier. The underlying economic activity, the investment, the jobs, the long-term tax base, would still be there.
At the same meeting, when asked directly if revenues would be positive without the OBBBA, Delaware's
revenue forecaster David Roose responded: "The revenues would've been positive. Current projections would've been about $300 million higher."
Translation: Without federal policy changes that incentivize business investment, Delaware's corporate tax collections would have grown. The "crisis" was entirely about whether Delaware would match Washington's
pro-investment policy, not about Delaware's economy failing.
"Corporate income tax represents only about 5% of Delaware's $6.8 billion budget.
This wasn't a structural crisis, it was a timing issue."
VIII. The Political "Fix" That Fixed Nothing
Rather than managing a temporary revenue dip with fiscal discipline, Governor Meyer called an extraordinary legislative session and pushed House Bill 255. The bill "decouples" Delaware from key OBBBA provisions, forcing businesses to spread deductions over multiple years instead of taking them immediately.
According to the Delaware Division of Revenue, HB 255 reduces the projected loss from $410 million to just $73.8 million over three years. Democrats immediately declared the $400 million problem "solved."
"From 1954 to 2022, 68 consecutive years, every state
with a corporate income tax allowed immediate R&D expensing.
That policy survived 12 presidents, 34 Congresses, 4 major recessions, the
dot-com crash, the 2008 financial crisis, and the COVID pandemic.
Delaware abandoned it for a three-year budget patch."
But here's what really happened: Delaware didn't solve anything. The state simply changed when businesses can deduct legitimate investments. Those deductions don't disappear, they're just delayed.
Meanwhile:
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Businesses now face dual compliance, one set of books for the IRS, another for Delaware
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Delaware broke from 60+ years of predictable tax conformity policy
From 1954 to 2022, 68 consecutive years, every state with a corporate income tax allowed immediate R&D expensing.
That policy survived:
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12 presidents (7 Democrats, 5 Republicans)
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34 Congresses
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4 major recessions
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The dot-com crash
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The 2008 financial crisis
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The COVID pandemic
Delaware just abandoned nearly seven decades of universally accepted tax policy for a three-year budget patch.
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The decoupling expires in 2030, creating future policy uncertainty
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National business groups immediately warned of reputational damage
This is political accounting, not economic policy.
The budget looks better on paper for three years while Delaware quietly makes itself less attractive
for the businesses we need to grow our future tax base.
"When expenses grow at 10% and revenues grow at 3%, you do not have a budget.
You have a countdown. HB 255 does nothing to stop the clock."
The 49-State Comparison: Every state in America faced the same OBBBA federal tax changes. Most maintained conformity with federal law. Why? Because sophisticated fiscal managers understand that tax conformity reduces compliance costs, maintains predictability, and signals stability to mobile capital.
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North Carolina maintained conformity.
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Texas maintained conformity.
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Nevada maintained conformity.
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Pennsylvania maintained conformity.
Some states that previously decoupled, including Rhode Island, California, Illinois, Michigan, and D.C., faced their own consequences. But those decisions were made over time, not in a rushed extraordinary session designed to avoid hard budget choices.
Delaware didn’t just break conformity. Delaware broke conformity because it refused to exercise fiscal discipline, despite having the reserves to weather the timing shock.
"Delaware didn't solve anything.
The state simply changed when businesses
can deduct legitimate investments.
Those deductions don't disappear, they're just delayed.
Meanwhile, businesses now face dual compliance,
one set of books for the IRS, another for Delaware."
IX. Delaware's Competitive Ranking Just Collapsed
While Governor Meyer was claiming victory, the Tax Foundation, the nation's leading independent tax policy
research organization, delivered devastating news about Delaware's competitiveness.
In November 2024, the Tax Foundation released its 2026 State Tax Competitiveness Index. Delaware fell
four places to 24th overall, and ranks dead last in corporate tax treatment among all 50 states.
Let that sink in.
Delaware, the state that built its economy on being the most business-friendly corporate domicile in America, now ranks 50th out of 50 states for corporate taxation.
The Tax Foundation was explicit about why:
"Delaware fell four places overall as other states implemented substantial reforms while Delaware largely stood still." And that assessment came before HB 255 passed.
The Tax Foundation ranks Delaware 50th out of 50 states in corporate tax climate.
Dead last. Worse than California. Worse than New York. Worse than New Jersey.
The reasons for Delaware's poor ranking:
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Delaware is one of only two states imposing both corporate income tax AND a gross receipts tax, a double-tax structure that penalizes revenue without regard for profitability
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The state's 8.7% corporate income tax rate, combined with gross receipts tax pyramiding, creates the worst competitive environment in the nation
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Delaware has failed to modernize while competitors like Louisiana, Iowa, and North Carolina have slashed rates and simplified their codes
The Tax Foundation specifically warned Delaware against proposals like HB 255:
"Decoupling from § 174 would make the state's tax code less friendly toward investment and undermine long-term growth. Delaware should abandon proposals that would further erode its competitiveness."
Delaware's business community warned in writing that HB 255 would "drive companies away."
Meyer's response: pass the bill along party lines using virtual voting to secure the bare minimum 26 votes needed.
Governor Meyer ignored that warning.
Now Delaware is not just ranked last in corporate taxation, we've also signaled to the business world that we'll change the rules whenever it's politically convenient.
"You cannot tax a franchise that flees to Texas. And companies are fleeing because Delaware broke the only thing that kept them: trust."
Critical Context: Delaware’s 50th-out-of-50 ranking in the Tax Foundation’s 2026 State Tax Competitiveness Index
And the damage isn't theoretical.
When Tesla's Elon Musk clashed with Delaware's Chancery Court over his compensation package in January 2024,
he didn't just complain, he moved Tesla's incorporation to Texas within months.
SpaceX, Dropbox, The Trade Desk, and Neuralink followed.
By 2025, Texas had captured 40% of companies leaving Delaware in what analysts call the 'Dexit' movement.
And now, with HB 255, Meyer just gave every CEO considering leaving one more reason to follow Musk's example.
"The Tax Foundation explicitly warned Delaware not to do this:
'Delaware should abandon proposals that would further
erode its competitiveness as a place to do business.'
Meyer signed HB 255 anyway."
Delaware responded with Senate Bill 21, the most significant overhaul of its corporate code in half
a century, attempting to stem the exodus. But the message was already sent: challenge Delaware's
corporate establishment, and businesses have alternatives.
Now, with HB 255, Delaware has given businesses another reason to reconsider. We're not just making
ourselves less competitive on taxes, we're signaling that when political pressures mount, Delaware will
change the rules.
First it was court decisions that prompted relocations.
Now it's tax policy.
The pattern is unmistakable: Delaware is becoming unreliable.
On December 19, 2025, just days ago, the Delaware Supreme Court reversed the Chancery Court decision and reinstated Musk's compensation package, vindicating his position.
But Tesla isn't coming back.
SpaceX isn't coming back.
The precedent is set: when Delaware becomes inconvenient, businesses have options.
And HB 255 just told them they should use those options.
While Delaware scrambled with Senate Bill 21 to stop companies from leaving after the Musk case, Meyer simultaneously broke 68 years of tax conformity with HB 255.
The message to business: "We'll reform our courts to keep you, then change our tax rules when it's politically convenient.'
You can't rebuild trust while breaking promises.
Critical Context: Delaware’s 50th-out-of-50 ranking in the Tax Foundation’s 2026 State Tax Competitiveness Index was published in November 2024, before HB 255 was even introduced. Delaware earned this dismal position because of its preexisting tax structure, particularly the combination of corporate income tax AND a gross receipts tax that creates double-tax pyramiding.
This makes HB 255 even more inexcusable, not less. Governor Meyer looked at a state already ranked dead last in corporate tax competitiveness and chose to make it worse. He added an additional competitive disadvantage, decoupling from federal conformity, on top of an already crippling tax structure.
When you’re already in last place, the last thing you do is handicap yourself further.
"Delaware ranks 50th in the nation, dead last, in
corporate tax climate. That's not spin. That's math."
X. While Delaware’s Courts Fix Their Mistakes →
Meyer Doubled Down on His
On December 19, 2025, exactly one month after Governor Meyer signed HB 255, and just four days after DEFAC confirmed the damage, Delaware's Supreme Court delivered a stunning reversal of the Chancery Court's Musk ruling.
The Court's language was direct and unequivocal:
"Rescission is inequitable here primarily because all parties must be restored to the status quo ante and total rescission leaves Musk uncompensated for his time and efforts over a period of six years." (Tornetta v. Musk, Delaware Supreme Court, p. 38, Dec. 19, 2025)
The Supreme Court acknowledged what the Chancery Court got wrong: you cannot strip someone of all compensation after they've delivered on every promise.
The Court ruled: "It is undisputed that Musk fully performed under the 2018 Grant,and Tesla and its stockholders were rewarded for his work."
Delaware's judiciary did what institutions of integrity do: they corrected their errors.
The Chancery Court's January 2024 ruling had prompted Musk to move Tesla to Texas and triggered the "Dexit" exodus. The Supreme Court's December 2025 reversal was Delaware's judicial branch attempting to restore the state's reputation for fairness and predictability in corporate law.
"Delaware Supreme Court
reversed the Musk ruling on December 19, 2025, trying to
restore Delaware's corporate law reputation.
But four days earlier, on December 15, DEFAC confirmed
Meyer's HB 255 had destroyed Delaware's tax competitiveness.
Supreme Court tried to fix one problem.
Meyer created another."
But thirty days earlier, on November 19, Meyer had already signed HB 255, making Delaware 50th out of 50 states in corporate tax climate. Four days before the Supreme Court ruling, on December 15, DEFAC confirmed Meyer's bill would extract $365 million from businesses.
The Supreme Court tried to restore Delaware's reputation with Musk. Meyer had spent the previous month destroying Delaware's reputation with everyone else.
On December 15, 2025, while the Supreme Court was preparing to vindicate Musk and restore Delaware's corporate law credibility, Meyer's DEFAC meeting confirmed that HB 255 would extract $365 million from businesses by breaking 68 years of tax conformity.
The contrast is devastating:
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Delaware Supreme Court: Acknowledges error, reverses course, restores compensation
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Governor Meyer: Ignores warnings, breaks conformity, denies any mistake
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Delaware Supreme Court: "Rescission leaves Musk uncompensated for six years of work"
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Governor Meyer: HB 255 leaves businesses with delayed deductions and dual compliance costs
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Delaware Supreme Court: Prioritizes fairness and restoring parties to proper positions
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Governor Meyer: Prioritizes three-year budget optics over Delaware's competitive position
The Court learned. Meyer didn't.
Delaware's judiciary spent 2024 rebuilding business confidence after the Musk error. Senate Bill 21, the most comprehensive corporate code overhaul in half a century, was the legislative branch's parallel effort to stop the corporate exodus.
Then Meyer passed HB 255, making Delaware the 50th-ranked state in corporate tax climate, just as the Supreme Court was trying to prove Delaware courts are still trustworthy.
"We reverse the remedy chosen by the Court of Chancery, rescission of the 2018 compensation plan. We reinstate the 2018 plan." (Tornetta v. Musk, Delaware Supreme Court, p. 5, Dec. 19, 2025)
The Supreme Court said: "We got it wrong. We're fixing it."
Meyer's message to businesses remains: "We'll change the rules when budgets get tight."
One Delaware institution acknowledged its mistakes and corrected them. The other refuses to admit error while the damage compounds.
"The Delaware Chamber of Commerce, Delaware Business Roundtable, and
Delaware BioScience Association jointly warned: 'The steepest impacts
will be borne by small and startup science and technology businesses.
R&D-intensive companies will face significant additional cash flow costs.'"
The Timeline of Delaware's Self-Inflicted Wound
BEFORE DECEMBER 19: "Delaware courts are hostile to business" (Musk narrative)
DECEMBER 19: Supreme Court fixes it, "Delaware courts were right after all"
AFTER DECEMBER 19: "But Delaware tax policy is now hostile" (Meyer's HB 255)
Delaware fixed one problem and created another, in the same month.
January 30, 2024: Delaware Chancery Court voids Musk's Tesla compensation package. Musk immediately announces Tesla will reincorporate in Texas. The corporate exodus begins.
February-November 2024: Companies flee Delaware. Texas captures 40% of "Dexit" reincorporations. Delaware scrambles to respond.
June 2024: Delaware passes Senate Bill 21, the most comprehensive corporate code overhaul in half a century, attempting to stop the exodus and restore business confidence.
October 20, 2025: DEFAC projects $410M revenue impact from federal OBBBA tax changes. Instead of fiscal discipline, Meyer calls extraordinary legislative session.
November 2025: Meyer rams through HB 255, decoupling Delaware from 68 years of federal tax conformity.
Delaware's business community warns this will damage the state's reputation.
Meyer ignores them.
December 15, 2025: DEFAC confirms HB 255 extracts $365M from businesses. Delaware is now officially ranked 50th out of 50 states in corporate tax climate by the Tax Foundation.
December 19, 2025:Delaware Supreme Court reverses the Chancery Court, vindicating Musk's position.
But Tesla isn't coming back.
SpaceX isn't coming back.
The damage is done.
December 15: DEFAC confirms HB 255 extracts $365M from businesses
December 19: Supreme Court says "We were wrong about Musk"
The Court Acknowledged Its Mistake. Meyer Hasn't. Delaware's judiciary did what institutions of integrity do: they corrected their errors.
The Supreme Court's ruling was explicit: "We reverse the remedy chosen by the Court of Chancery, rescission of the 2018 compensation plan. We reinstate the 2018 plan." (Tornetta v. Musk, Delaware Supreme Court, p. 5, Dec. 19, 2025)
The Supreme Court said: "We got it wrong. We're fixing it."
Meyer's message to businesses remains: "We'll change the rules when budgets get tight."
One month. That's how long it took for the full consequences of Meyer's decision to become clear.
On November 19, Meyer signed HB 255.
On December 15, DEFAC confirmed it would extract $365 million and rank Delaware 50th.
On December 19, four days after DEFAC's confirmation and thirty days after Meyer's signing, Delaware's Supreme Court tried to restore credibility by reversing the Musk ruling. But by then, Meyer had already made Delaware 50th in corporate tax climate.
The Supreme Court tried to fix Delaware's reputation. Meyer had spent the previous month destroying it.
One Delaware institution tried to rebuild trust.
Another destroyed it.
Four days apart.
"The $2.5 million carveout is not a feature. It is a confession.
The Administration knew HB 255 hurt small businesses. The carveout proves it."
Two Institutions, Two Messages, One Disaster
While Delaware's judiciary tried to restore confidence in Delaware corporate law, Meyer's tax policy destroyedconfidence in Delaware tax policy.
The Supreme Court said to businesses:
-
"We acknowledge our mistakes. We're still reliable."
-
"Rescission leaves Musk uncompensated for six years of work", and we're fixing that
-
"It is undisputed that Musk fully performed", he earned this
Meyer's HB 255 said to businesses:
-
"When budgets get tight, we'll change the deal."
-
HB 255 leaves businesses with delayed deductions and dual compliance
-
You performed, you invested, but we're taking it anyway through decoupling
The Court tried to rebuild Delaware's reputation for predictability. Meyer shattered it by decoupling from federal tax conformity, something Delaware had maintained for 68 consecutive years through 12 presidents, 4 recessions, and countless budget pressures.
The Court said: "Delaware corporate law is still the gold standard."
Meyer said: "Delaware tax law is now unreliable, expires in 2030, and ranks dead last nationally."
You can't rebuild trust in one chamber while breaking promises in another.
The message to corporate America is now unmistakable: Delaware is unreliable.
When its courts make mistakes, companies leave. When the Supreme Court fixes those mistakes, it doesn't matter, because the Governor has already given businesses new reasons to stay away.
The Chancery Court damaged Delaware's corporate law reputation.
The Supreme Court tried to repair it.
Meyer's HB 255 made the damage permanent.
"The business community wasn't crying wolf.
They were reading the same tax tables everyone else could see.
Delaware decoupling = competitive disadvantage.
HB 255 would drive companies away.
Meyer signed it anyway."
XI. The Merck Contradiction: $30 Million for Giants → Taxes for Everyone Else
In February 2025, Governor Meyer's administration approved a $30 million taxpayer-backed grant to Merck, one of the world's largest pharmaceutical companies, for a $1 billion campus near Wilmington. Nine months later, Meyer signed HB 255, extracting $328 million from businesses of all sizes by forcing them to delay tax deductions.
Consider the math. Merck, a company with $60 billion in annual revenue, receives $30 million in taxpayer money. Delaware's small and mid-sized businesses, collectively, have $328 million extracted through HB 255. The ratio is roughly 11 to 1 against local businesses.
Meyer claimed in January 2025 that Delaware would not focus on 'chasing major projects' with taxpayer funds. Ten months later, he signed HB 255 while sitting on the largest taxpayer-backed corporate incentive in state history. The BioScience Association's members are 'mostly small biotech companies with five or fewer employees.' They opposed HB 255 because it harms exactly those companies.
Meanwhile, their largest member, Merck, receives a $30 million grant. This is not an innovation economy. This is an economy where the rules depend on your size. If you are big enough, Delaware gives you money. If you are small enough to need R&D expensing to survive, Delaware takes your money. That is the real message of HB 255."
"Merck gets $30 million. Small businesses get $328 million extracted.
If you are big enough, Delaware gives you money.
If you are small enough to need R&D expensing, Delaware takes your money."
XII. The Two Delawares: Grants for Giants Taxes for Everyone Else
Delaware operates two economic systems. One system gives taxpayer money to corporations. The other takes taxpayer money from corporations. The same state that handed $30 million to Merck signed HB 255 to extract $328 million from businesses of all sizes. The same state that reduced Amazon's property taxes by $2.5 million doubled homeowners' property taxes. The same state that classified Bloom Energy's natural gas fuel cells as 'renewable' to justify $405 million in ratepayer subsidies now claims it cannot afford to let businesses deduct R&D expenses in the same year they occur.
Since 1997, Delaware has provided approximately $500 million in taxpayer-funded grants and subsidies to corporations. HB 255 extracts $410 million from businesses over three years. Delaware gave away nearly three decades of corporate welfare in a single legislative session.
The pattern is consistent: large corporations receive grants, property tax reductions, infrastructure investments, and ratepayer subsidies. Small and mid-sized businesses receive HB 255. Merck has a market cap of $200 billion. It received a $30 million grant. Corteva has $2 billion in cash. It received a $1.5 million grant to stay in Wilmington. Amazon's Boxwood facility was purchased for $392 million. It was assessed at $108 million for property tax purposes.
Meanwhile, the Delaware BioScience Association warned that HB 255 would harm 'small and startup science and technology businesses whose existence and immediate growth potential depends upon receiving the immediate benefit of R&D expensing.' These are companies with five or fewer employees. They do not receive $30 million grants. They receive tax increases. This is not an innovation economy. This is a two-tier economy where the rules depend on your size and your political connections.
If you are large enough to command a seat at the Council on Development Finance, you receive taxpayer money. If you are small enough to need immediate R&D deductions to survive, you pay more.
Since 1997, Delaware has provided approximately $500 million in taxpayer-funded grants and subsidies to corporations. In a single legislative action, HB 255 extracts $410 million from businesses. Delaware gave away decades of corporate welfare in corporate tax extraction in one week.
"Delaware gave away 27 years of corporate welfare in 27 days.
The same state that hands $30 million to Merck signed
HB 255 to extract $328 million from businesses of all sizes.
Large corporations receive grants. Small businesses receive tax increases.
That is the two-tier economy HB 255 creates."
Since 1997, Delaware has provided approximately $500 million in taxpayer-funded grants and subsidies to corporations. In a single legislative action, HB 255 extracts $410 million from businesses. Delaware gave away decades of corporate welfare in corporate tax extraction in one week.
Delaware's Corporate Welfare History
Delaware has a documented history of providing taxpayer-funded incentives to attract and retain corporations. The following table documents the largest grants awarded through the Delaware Strategic Fund and related programs:
Sources: Delaware Business Times, Spotlight Delaware, Good Jobs First, A Better Delaware
Case Study: Bloom Energy
The Bloom Energy deal illustrates Delaware's approach to corporate welfare. In 2011, the state classified Bloom's fuel cells as "renewable energy" despite using natural gas and producing toxic byproducts. The University of Delaware built a 240,000 square foot facility that Bloom occupies at $1 per year rent. Ratepayers pay a surcharge on every electric bill that has transferred more than $405 million to Bloom Energy since 2012. Bloom promised 900 jobs by 2016. By late 2019, Bloom employed 340 workers. State legislators called the deal "a hell of an expensive lesson picking winners and losers." The surcharges continue until 2033.
Case Study: Amazon's Property Tax Reduction
In the 2025 New Castle County property reassessment, Amazon's state-of-the-art Boxwood distribution center was assessed at $108 million, despite being purchased by an Australian investment firm for $392 million in 2023. This valuation resulted in what Spotlight Delaware called "the single largest tax break of any property in the state at more than $2.5 million."
Meanwhile, homeowners in the same county saw their property tax bills double or triple. The GM plant that previously occupied the Boxwood site paid nearly $1 million annually in property taxes to the Red Clay Consolidated School District. The Amazon facility pays approximately $250,000.
The Fundamental Contradiction
Delaware operates two contradictory economic policies simultaneously:
The Math Does Not Add Up
Consider the arithmetic of Delaware's economic policy:
-
Total corporate grants since 1997: approximately $500 million (Good Jobs First)
-
Total extraction from HB 255: $410 million over three years
-
Bloom Energy ratepayer subsidies alone: $405 million and counting
-
Net effect: Delaware gave away 27 years of corporate welfare in 27 days
Summarized
This exposes the fundamental contradiction in Delaware's economic policy. The state simultaneously gives money to large corporations and takes money from businesses of all sizes. This is not fiscal conservatism. This is not business-friendly policy. This is a two-tier system where political connections determine whether you pay or receive.
The Bloom Energy case is particularly powerful because it shows the state's willingness to burden ratepayers for decades to subsidize a company that failed to meet its hiring promises. Delaware deemed natural gas fuel cells "renewable" to justify $405 million in subsidies that continue until 2033. Yet the same state claims it cannot afford to let businesses deduct R&D expenses when they occur.
The Amazon property tax reduction is politically devastating because it occurred in the same reassessment that doubled homeowners' property taxes. The contrast is visceral: a trillion-dollar company gets a $2.5 million tax break while working families see their bills double.
The bottom line: HB 255 is not about fiscal responsibility. A state that provides $500 million in corporate welfare over 27 years cannot claim fiscal necessity when extracting $410 million over three years. The real message of HB 255 is that Delaware has two sets of rules: one for corporations with political access, and one for everyone else.
"Bloom Energy received $405 million in ratepayer subsidies for natural gas fuel cells
the state called 'renewable.' Amazon received a $2.5 million property tax reduction
while homeowners' bills doubled. Merck received $30 million. And Delaware signed
HB 255 because it could not afford to let small businesses deduct R&D expenses when they occur. The math does not add up. The policy does not add up. The only thing that adds up is the two-tier system: grants for giants, taxes for everyone else."
RETURN TO TABLE OF CONTENTS
XIII. The Dexit Accelerator: 50+ Companies and Counting
Approximately 60 U.S. public companies have changed their jurisdiction of incorporation since January 1, 2024.
Texas captured 40%. Nevada captured 35%. Delaware captured zero. And then Meyer signed HB 255, ensuring they will never come back."
The Chancery Court ruling against Musk was the match. HB 255 was the gasoline.
When Chancellor McCormick voided Musk's $56 billion pay package on January 30, 2024, companies started leaving. Tesla went to Texas. SpaceX went to Texas. Neuralink went to Nevada. Within weeks, the exodus had begun.
But the exodus could have been reversed. Delaware's institutions tried to self-correct. The Legislature passed Senate Bill 21, the most comprehensive corporate law overhaul in half a century. Meta Platforms, with a market capitalization exceeding $1 trillion, considered leaving for Texas. After SB21 passed, Meta stayed. That proved Delaware could compete when leadership responded to business concerns.
Then the Delaware Supreme Court reversed the Musk ruling on December 19, 2025. The Court acknowledged that rescission 'worked a manifest injustice.' The Court found Musk 'fully performed' and Tesla shareholders 'were rewarded.' The highest court in Delaware tried to restore the state's corporate law reputation.
But Governor Meyer had already destroyed Delaware's tax competitiveness exactly 30 days earlier.
On November 19, 2025, Meyer signed HB 255. He ignored the Tax Foundation's 50th-out-of-50 ranking. He ignored the Delaware Chamber of Commerce. He ignored the Delaware Business Roundtable. He ignored the Delaware BioScience Association. He broke 68 years of federal tax conformity to extract $328 million from businesses.
Now Delaware has two competitive problems, not one. Even if the Chancery Court reputation fully recovers, Delaware is still 50th out of 50 in corporate tax climate. Texas has 0% corporate income tax. Nevada has 0% corporate income tax. Delaware has 8.7% plus HB 255 uncertainty plus gross receipts tax pyramiding.
The companies that left are not coming back. The companies considering departure now have two reasons to leave instead of one.
"Approximately 60 U.S. public companies have changed their
jurisdiction of incorporation since January 1, 2024.
Texas captured 40%. Nevada captured 35%. Delaware captured zero.
And then Meyer signed HB 255, ensuring they will never come back."
The Numbers
According to Mondaq research published January 2026, approximately 60 U.S. public companies have changed their jurisdiction of incorporation since January 1, 2024. Analysis Group research confirms Delaware experienced a net loss of 11 large public firms (market cap over $250 million) during 2024 through June 2025 alone. Since then, Coinbase ($82 billion), the Dolan family companies (AMC Networks, Madison Square Garden Entertainment, Madison Square Garden Sports, Sphere Entertainment), Dillard's, and others have completed or announced departures.
The combined market capitalization of departed companies now exceeds $2.5 trillion. Tesla alone accounts for over $1 trillion. Texas captured approximately 40% of reincorporations. Nevada captured approximately 35%. Delaware captured zero.
The Venture Capital Warning
In July 2025, Andreessen Horowitz, one of Silicon Valley's most influential venture capital firms, announced it was leaving Delaware for Nevada. The firm published a blog post titled 'We're Leaving Delaware, And We Think You Should Consider Leaving Too.'
This is devastating. Andreessen Horowitz advises hundreds of startups. When a top-tier VC firm tells portfolio companies 'don't incorporate in Delaware,' the long-term damage is immense. The future Googles, Facebooks, and Teslas will incorporate elsewhere. They will never know Delaware. They will never pay Delaware franchise taxes. They will never contribute to Delaware's professional services ecosystem.
Meyer signed HB 255 after this announcement. He knew the venture capital community was abandoning Delaware. He signed anyway.
The Bottom Line
The Delaware Supreme Court tried to fix one problem on December 19, 2025. Meyer created another problem on November 19, 2025. Supreme Court reversal plus HB 255 equals Delaware cannot compete.
The Chancery problem was not Meyer's fault. It happened before he took office. The tax competitiveness problem is entirely Meyer's fault. He took Delaware's one competitive problem and added a second.
That is how you turn an exodus into a permanent migration.
"The Chancery Court ruling was the match. HB 255 was the gasoline.
Meyer took Delaware's one competitive problem and added a second.
That is how you turn an exodus into a permanent migration."
XIV. Delaware's Business Community Raised the Alarm: The Timeline of Delaware's Self-Inflicted Wound
This wasn't a partisan issue.
Delaware's leading business organizations, the Delaware State Chamber of Commerce, Delaware Business Roundtable, and Delaware BioScience Association, all opposed HB 255 in writing.
"The Delaware Chamber of Commerce, Delaware Business Roundtable, and
Delaware BioScience Association jointly warned: 'The steepest impacts
will be borne by small and startup science and technology businesses.
R&D-intensive companies will face significant additional cash flow costs.'"
Their warning was stark:
"The steepest impacts of this change would be borne by small and startup science and technology businesses whose existence and immediate growth potential depends upon receiving the immediate benefit of R&D expensing."
Business leaders testified that decoupling represents a "drastic departure from decades of bipartisan practice" and warned it would drive companies away. One legislator reported that businesses told him companies are now examining "all of the business decisions that the General Assembly has been making, including this decoupling."
Despite these warnings, from people who actually run businesses and create jobs, House Democrats passed
HB 255 by the bare minimum 26 votes needed (after changing House rules to allow virtual voting to secure enough support).
The Senate followed suit along party lines.
"The business community wasn't crying wolf. They were reading the same tax tables everyone else could see. Delaware decoupling = competitive disadvantage.
HB 255 would drive companies away. Meyer signed it anyway."
Delaware's business leaders didn't just oppose HB 255, they warned legislators exactly what would happen.
In testimony and written submissions, they laid out the consequences Meyer chose to ignore.
Brian DiSabatino, President of the Delaware Business Roundtable and CEO of EDiS Company, told lawmakers directly:
"Even if the dollar amount [returned in the tax credit] is not massive, it's the perception out there that we're different. When people are making entrepreneurial choices, that perception may be all we have when the next Merck is trying to figure out where to locate."
The warning was clear: Delaware's competitive advantage isn't just about dollars—it's about reputation and predictability.
Meyer passed HB 255 anyway.
"Delaware was the only state in the Mid-Atlantic with bonus depreciation.
Meyer surrendered that advantage for free. Pennsylvania sends its thanks."
In their joint letter, the Delaware State Chamber of Commerce, Delaware Business Roundtable, and Delaware BioScience Association put it bluntly: "The risks House Bill 255 sets in motion may lessen, not strengthen,our role in attracting the very small businesses every public official proudly professes to support."
Meyer got the letter.
The House passed HB 255 with the bare minimum 26 votes needed, using virtual voting to secure the majority.
"They no longer feel obligated to hide it."
XV. The Real Structural Crisis: Medicaid
While politicians debate HB 255’s impact on corporate income tax, which represents only 5% of Delaware’s budget, the DEFAC documents reveal the true structural crisis hiding in plain sight: Medicaid.
DEFAC Expenditure Forecast - Medicaid Trajectory
Medicaid is growing at 10-12% annually while total revenues grow at 2-3%. This mismatch is unsustainable. The OBBBA timing issue, the supposed “crisis” that justified HB 255, is a rounding error compared to this structural imbalance.
Michael Houghton’s concern at the October DEFAC meeting about “the problem of slowing revenue and increasing expenditures” speaks directly to this structural crisis. The Administration’s response? “Looking into this.”
HB 255 does nothing to address Medicaid growth. It does nothing to address the revenue-expenditure gap. It simply extracted money from businesses to avoid confronting the real structural problems Delaware faces.
Source: DEFAC Expenditure Forecast, December 2025
"They no longer feel obligated to hide it."
XVI. Mid-Sized Businesses Get Stuck with the Bill: Two Institutions, Two Messages, One Disaster
HB 255 includes a carved-out allowance for small businesses to immediately deduct up to $2.5 million in equipment purchases annually.
Democratic sponsors point to this as proof they're protecting small business.
But here's who that doesn't protect:
-
Growing companies investing more than $2.5 million in expansion
-
Science and technology startups with high R&D costs and no revenue yet
-
Manufacturing firms investing in new equipment and facilities
-
Mid-sized firms that lack the tax departments to navigate dual compliance systems
Large corporations have options.
They can shift operations.
They can hire compliance teams.
They can incorporate elsewhere.
Mid-sized businesses don't have those luxuries.
They're the ones now facing:
-
Higher accounting costs to maintain separate federal and Delaware books
-
Delayed tax benefits that hurt cash flow during critical growth phases
-
Uncertainty about whether rules will change again when HB 255 sunsets in 2030
"The Tax Foundation found: 'Delaware's corporate tax, particularly
with gross receipts layering, falls heavily on mid-sized businesses.'
HB 255 makes it worse by adding compliance costs and cash flow delays."
And don't forget the ripple effects.
When a mid-sized manufacturer decides to expand in North Carolina instead of Delaware, it's not just that company that loses.
"Twenty-eight companies left Delaware in 2025. The number is small.
But signals matter. And every signal points toward the exit."
It's the:
-
Restaurant that would have served their employees lunch
-
Gas station near their facility that would have sold fuel
-
Local contractors who would have maintained their building
-
Convenience stores where workers would have stopped
-
Housing market that would have benefited from new employees
Economic development isn't just about Fortune 500 companies. It's about creating the conditions where
businesses of all sizes choose to invest and grow here.
HB 255 just made Delaware a harder choice for exactly the companies we need most.
"Gross receipts tax creates tax pyramiding, cascading levies on the same
dollar as it moves through supply chains. For manufacturers, distributors,
and retailers, this multiplies the effective tax rate far beyond 8.7%."
The signals extend beyond corporations. In November 2025, Kurt Foreman, the only CEO the Delaware Prosperity Partnership has ever known, left Delaware for a position in Ithaca, New York. Under Foreman, DPP supported 87 projects that brought $3.75 billion in capital investment. He departed weeks after Meyer restructured the DPP board and signed HB 255.
When your chief economic recruiter leaves for a town of 100,000 people, that is not a career move. That is a verdict. Foreman spent eight years building Delaware's recruitment apparatus. He chose not to stay and execute Meyer's 'new vision.' The DPP is now conducting a national search for his replacement. The new CEO will inherit a state ranked 50th in corporate tax treatment and a governor who gives $30 million grants to pharmaceutical giants while extracting $328 million from businesses of all sizes.
"When your chief economic recruiter leaves for a town of 100,000 people, that is not a career move. That is a verdict."
XVII. Meyer's Response: Deflection, Distortion, and Denial
When asked about the business community's warnings, Governor Meyer dismissed their concerns. In his official statement upon signing HB 255, Meyer characterized the opposition:
"This is a perfect example of the government working together swiftly to make sure hard-working Delawareans
are protected, and families don't bear the costs of unanticipated federal tax changes intended to benefit large,
out-of-state businesses."
At a November press conference, Meyer went further, claiming the revenue impact was "100% linked to Republican tax cuts for the wealthy."
Meyer's defense rests on three claims:
-
He acted "swiftly" to "protect families"
-
HB 255's benefits would go to "large, out-of-state businesses"
-
This is entirely Republicans' fault for federal tax policy
All three claims are false. "Swift action to protect families"?
Meyer had three weeks between the October 20 DEFAC meeting and the November special session. He chose
not to explore alternatives, not to freeze spending, not to use reserves, not to delay non-essential programs.
What Meyer calls "swift action" was actually swift rejection of every option that didn't involve extracting money from businesses.
And "protect families"? Delaware families work for businesses.
When you make Delaware the 50th-ranked state for corporate tax climate, those families lose the jobs that would have come here, the raises that growth provides, the opportunities that investment creates.
Meyer protected his budget spreadsheet. He sacrificed Delaware families' long-term economic opportunity.
"Large, out-of-state businesses"?
This is the most dishonest part of Meyer's defense.
Delaware's own business community, the Chamber of Commerce, Business Roundtable, and BioScience
Association, wrote specifically that HB 255's "steepest impacts would be borne by small and startup science and technology businesses whose existence and immediate growth potential depends upon receiving the immediate benefit of R&D expensing."
Not large corporations. Small and startup businesses.
Brian DiSabatino warned Meyer directly: "When people are making entrepreneurial choices, that perception may be all we have when the next Merck is trying to figure out where to locate."
Meyer's response? Dismiss them all as defending "large, out-of-state businesses."
The reality:
-
Small biotech startups investing in R&D: Hit with delayed deductions
-
Manufacturing companies buying equipment: Hit with delayed deductions
-
Delaware tech companies growing operations: Hit with delayed deductions
These aren't "out-of-state" businesses. They're Delaware businesses deciding whether to STAY or follow Tesla out the door.
"100% Republicans' fault"?
This is deflection masquerading as explanation.
49 other states faced the same federal tax changes.
Most maintained conformity with federal law.
Why?
Because they understood what Meyer refuses to acknowledge: tax conformity reduces compliance costs, maintains predictability, and signals stability.
North Carolina maintained conformity.
Texas maintained conformity.
Nevada maintained conformity.
Delaware broke conformity.
That's not Republicans' fault. That's Matt Meyer's choice.
And blaming federal policy is particularly rich coming from a governor who:
-
Had $980 million in reserves (could have covered the impact)
-
Presided over 35.5% spending growth ($780M above baseline)
-
Refused to freeze $18.7 million in new government positions
The federal tax change was a timing issue. Meyer's spending explosion made it a crisis.
Republicans didn't force Meyer to break 68 years of tax conformity.
Republicans didn't force Meyer to ignore business warnings.
Republicans didn't make Delaware 50th out of 50 states.
Meyer did that all by himself.
Meyer's response reveals everything wrong with HB 255: it deflects blame, distorts the facts, and denies the damage.
Deflection: "Republicans' fault" (ignoring 49 other states' choices)
Distortion: "Large, out-of-state businesses" (ignoring his own business community's warnings
about small businesses)
Denial: "Protecting families" (ignoring that families need jobs and economic growth)
This wasn't swift action to protect Delaware. This was political expedience disguised as fiscal responsibility.
And Delaware businesses, and the families who work for them, will pay the price.
"Carney built the Budget Stabilization Fund for exactly this moment.
Meyer called it 'excess revenue' and reached for businesses instead."
What Defender of HB 255 Would Argue and Why They're Wrong
Sophisticated critics might defend HB 255 on several grounds. Here’s why each argument fails:
“HB 255 prevented service cuts.” Response: It also prevented fiscal discipline. Delaware had $980 million in reserves specifically designed to buffer revenue volatility. The choice wasn’t between HB 255 and cutting services, the choice was between extracting money from businesses and exercising the spending discipline that responsible governance requires.
“The Tax Foundation is partisan, their rankings reflect ideological preferences.” Response: DEFAC’s own members raised the same concerns. Michael Houghton, an eight-year council veteran, questioned whether decoupling was wise given “what the environment is.” The business community’s warnings came from the Delaware State Chamber of Commerce, Delaware Business Roundtable, and Delaware BioScience Association, not partisan think tanks.
“Federal policy caused this crisis, 49 other states faced the same changes.” Response: Exactly. And most of those states maintained conformity. Delaware chose to break from federal alignment while competitors maintained predictable tax treatment. This was Meyer’s choice, not an inevitable consequence of federal policy.
“Immediate expensing primarily benefits large corporations, not small businesses.” Response: Delaware’s own business community explicitly warned that “the steepest impacts of this change would be borne by small and startup science and technology businesses whose existence and immediate growth potential depends upon receiving the immediate benefit of R&D expensing.” The people who actually run Delaware businesses said the opposite of what Meyer claimed.
“Some states have decoupled without catastrophic damage.” Response: Those states didn’t already rank 50th out of 50 in corporate tax competitiveness. Those states didn’t have a corporate exodus already underway. Those states didn’t pass their decoupling in a rushed extraordinary session while simultaneously trying to pass Senate Bill 21 to stop companies from leaving. Context matters. Delaware’s context made HB 255 uniquely damaging.
"And now, Governor Matt Meyer asks Delaware to trust his fiscal stewardship,
even as the county he led is bracing for a foreclosure wave it was never prepared for."
XVIII. How Tax Differentials Actually Drive Location Decisions
Academic research on tax competition makes clear what politicians often ignore: while corporate headquarters rarely relocate based on tax rates alone, marginal site selection decisions, where to build the next R&D lab, which state gets the manufacturing expansion, where to locate back-office functions, are highly tax-elastic.
Studies show that corporate tax differentials of 3-5 percentage points materially impact where firms locate mobile operations. Delaware just created exactly such a differential by decoupling while neighboring states maintained conformity.
The Tiebout hypothesis in economics suggests that mobile capital flows to jurisdictions offering the optimal combination of taxes and services. Delaware just made its combination worse while competitors improved theirs.
In economic theory, Delaware moved from 'leader' to 'laggard' status in a single legislative session.
"98.6% of the spending limit. No margin for error.
No room for recession. No buffer for the next crisis.
HB 255 filled the spreadsheet while the ceiling stayed exactly where it was."
The Duel Compliance Tax: What It Actually Costs
HB 255 forces every business operating in Delaware to maintain two sets of books, one for federal taxes and one for Delaware taxes. This isn’t an abstract concern; it’s a quantifiable cost.
Based on consultation with accounting professionals, mid-sized businesses can expect annual dual compliance costs ranging from $15,000 to $50,000 depending on complexity. For companies with significant R&D or capital investment, where the federal-Delaware differences are largest, costs trend toward the higher end.
For a company deciding between Delaware and a conforming state for a new facility, this compliance cost becomes part of the site selection calculation. It’s not just the delayed deduction benefit, it’s the ongoing operational overhead of navigating two different tax regimes for the life of the facility.
Large corporations can absorb this cost. The mid-sized businesses Delaware needs most, the ones deciding where to expand, where to locate the next R&D lab, where to build the next manufacturing facility, feel this cost acutely. It’s one more factor pushing them toward states that didn’t choose political convenience over business predictability.
"In the moment Delaware led the nation in foreclosures,
the county expanded its foreclosure machinery."
XXIV. The Path Not Taken: Real Fiscal Leadership
Here's what responsible fiscal stewardship actually looks like.
Governor Meyer could have:
1. Acknowledged the Truth
Tell Delawareans:
"Federal policy changes will create 3-4 years of softer corporate tax receipts, about 5% of our budget. This is a timing issue tied to when deductions occur, not a collapse in economic activity. We have the reserves to weather this."
The OBBBA changes are about when businesses deduct investments, not whether those investments exist. They front-load deductions; they don't erase the underlying economic activity.
The Tax Foundation and multiple analysts have been clear: the big revenue hit is heavily a timing effect, receipts dip now and normalize later.
2. Implemented Fiscal Discipline
-
Freeze non-essential spending. Every state program, every initiative, every expansion would be put on hold unless it's truly critical.
For example:
Delaware's FY25 budget included $18.7 million for new government positions. Freeze those hires for one year.
That alone covers 4.6% of the supposed $410M crisis, and protects Delaware's competitive advantage.
-
Implement a temporary, targeted spending freeze on non-essential expansions and political hiring
-
Defer lower-priority capital projects while protecting core services, schools, public safety, essential programs
-
Slow discretionary program expansions until revenue stabilizes
-
Use Delaware's existing reserves and surpluses as they were meant to be used: to buffer against volatility
This is what serious fiscal stewardship looks like: you weather the storm with discipline instead of pretending the sky is clear.
"Medicaid grows at 10%. Revenue grows at 3%. The math does not work.
HB 255 avoided this conversation. The conversation is still coming."
3. Maintained Delaware's Competitive Advantage
Keep full conformity with federal expensing rules.
Signal to businesses:
"If Washington wants to reward investment, Delaware will be the state that makes it easiest to take advantage.
No dual compliance. No separate schedules. No complexity."
By staying aligned with the federal code, Delaware could have sent a very different message:
"If Washington wants to reward investment and full expensing, Delaware will be the small state that says: bring that investment here."
That could have meant:
-
Telling both large and mid-sized firms: you don't need a second set of books for Delaware
-
Making Delaware the most predictable OBBBA-conforming jurisdiction in the region
-
Building a pipeline of real-economy growth: jobs, payroll, personal income tax, and gross receipts
that ultimately stabilize the budget far more than squeezing corporations on timing ever could
4. Built for Long-Term Growth
Use this moment to reduce Delaware's dangerous over-reliance on volatile corporate income tax. Admit that corporate income tax is volatile by nature and shouldn't be treated like a stable pillar of the budget.
Use the OBBBA shock to shift the state's dependence away from a narrow, volatile corporate base, and toward:
-
Broader, more predictable revenue bases
-
Multi-year budgeting that anticipates swings instead of overreacting to them
Real reform means building a tax structure that doesn't need emergency patches every time Congress moves, and growing a broader economic base so temporary dips in one revenue source don't trigger crisis sessions.
"Delaware has $980 million in reserves. The three-year OBBBA impact?
$410 million—42% of reserves. That's exactly what reserves are for:
managing short-term revenue volatility while
protecting long-term competitiveness."
What Happens Next
HB 255 expires in 2030. That gives Delaware's next governor, and Delaware's voters, a choice:
Option 1:
Make HB 255 permanent. Accept that Delaware is no longer a business-friendly state. Watch the Tax Foundation ranking drop even further. Count the ghost facilities that never get built.
Option 2:
Return to federal conformity. Apologize to the business community for the instability. Commit to fiscal discipline that doesn't punish investment. Rebuild what Meyer damaged.
The question isn't whether Delaware can afford to reverse HB 255.
The question is whether Delaware can afford NOT to.
Governor Meyer made his choice.
In 2028, Delaware voters will make theirs.
"Meyer could have managed this with modest spending restraint.
Delaware's total General Fund spending grew $780 million from
FY2021 to FY2025, 35.5% growth. OBBBA's three-year impact? $410 million.
The spending growth ALONE was nearly double the OBBBA challenge."
RETURN TO TABLE OF CONTENTS
XX. Two Delawares: The Path Chosen vs. The Path Rejected
If Governor Meyer had not decoupled and had instead done the harder, better work, Delaware's trajectory over the next decade would look very different:
The Path We Chose (HB 255 Decoupling)
Short Term (2026-2028):
Budget spreadsheets look stable on paper. Politicians claim victory.
But:
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National headlines: "Delaware breaks from federal code, creates business uncertainty"
-
Tax Foundation: Delaware ranks dead last (50th) in corporate tax competitiveness
-
Business leaders quietly advise clients to consider other states for expansion
-
Mid-sized firms face dual compliance costs; some relocate operations
Medium Term (2029-2032):
HB 255 expires. Political fight over whether to extend. Policy uncertainty intensifies.
Meanwhile:
-
Companies that would have chosen Delaware expand elsewhere
-
Personal income tax and gross receipts growth slower than projected
-
Small businesses supporting those "ghost facilities" struggle
Beyond 2032:
Delaware's reputation as unpredictable and politically-driven is established.
The state that once led in business-friendly policy is now playing catch-up.
"Path A (Chosen): Break conformity, extract $365M from businesses,
rank 50th/50, create uncertainty through 2030.
Path B (Rejected): Use reserves, modest restraint, maintain competitiveness,
preserve reputation, protect long-term growth."
The Path Rejected (Conformity + Fiscal Discipline)
Short Term (2026-2028):
Tighter operating budgets require discipline. Some deferred projects.
But:
-
Delaware signals: "We honor our commitments to businesses"
-
National recognition as the most predictable OBBBA-conforming state
-
Companies planning expansions add Delaware to their short list
-
No anti-business headlines about Delaware "breaking from the federal code" and "creating chaos" for companies
-
No need for emergency, extraordinary sessions framed as last-minute rescues from a crisis of timing
-
A clear message to investors: Delaware honors its word and doesn't rewrite the deal when spreadsheets get uncomfortable
"$980 million in reserves. $410 million three-year challenge. 42% of reserves.
That's EXACTLY what reserves are for: protecting long-term interests
during short-term volatility."
Medium Term (2029-2032):
Timing shock fades as deductions normalize. Corporate tax receipts recover.
Meanwhile:
-
New R&D facilities drawn by predictable, investment-friendly policy
-
Manufacturing expansions create construction, service, and retail jobs
-
Personal income tax and gross receipts grow from broader economic base
-
A consistent, conforming tax code draws more capital-intensive facilities, more R&D activity, and more mid-sized firms choosing to expand here rather than somewhere else
Beyond 2032:
Delaware's reputation for stability attracts quality investment. Budget relies less on volatile corporate income tax, more on diversified growth. Delaware leads again.
If you pair conformity + reform + discipline, you get what every small state wants:
A reputation as a stable, predictable, investment-friendly jurisdiction. A tax code that doesn't need to be patched in an "extraordinary session" every time Congress moves. A budget that relies less on squeezing timing out of corporate books and more on real economic growth.
The Economic Theory Behind Why This Matters
"HB 255 sunsets in 2030. That is not a feature. That is a fuse.
Five years of uncertainty built into Delaware's tax code.
Businesses are already deciding accordingly."
Real Options Theory:
Companies making multi-decade facility investments value flexibility and policy stability.
HB 255's 2030 expiration creates what economists call a 'real options problem', firms must discount Delaware's value because they cannot predict post-2030 rules.
This uncertainty has measurable cost in site selection models.
Agglomeration Economics:
Delaware's historical success came from positive feedback loops, companies located here BECAUSE other companies were here.
Tax policy stability reinforced this agglomeration benefit. HB 255 risks reversing the dynamic: as each firm has incrementally more reason to look elsewhere, the agglomeration benefit erodes for everyone.
Economic clusters don't collapse overnight; they gradually thin out as marginal decisions accumulate.
"Under Path A, Delaware ranks 50th in corporate tax climate
and faces companies considering departure.
Under Path B, Delaware would have maintained its competitive position
and attracted investment."
XXI. The Budget Reality: We Could Have Afforded the Right Choice
Let's be clear about Delaware's actual fiscal position, using DEFAC's own October 2025 numbers:
-
Cumulative cash balance: $2.4 billion (December update: $1.9 billion)
-
Budget Stabilization Fund: $469.3 million
-
Budget Reserve Account: $366.5 million
-
Total reserves: $980.4 million (13.4% reserve ratio)
Delaware had nearly $1 billion in reserves, specifically designed to buffer against revenue volatility, sitting in accounts while politicians claimed we "had no choice" but to rewrite tax policy.
"States that never had bonus depreciation face no credibility problem.
Delaware just created one by abandoning 68 years of precedent."
The $410 million timing shock over three years could have been absorbed by:
-
Strategic use of reserves ($980M available)
-
Slowing the 11.8% expenditure growth from FY 2024 to FY 2025
-
Moderating the planned 4.7% expenditure increase for FY 2026
(December update shows actual increase of 4.2%)
-
Reducing non-essential spending as revenues normalize
"Meyer's FY2026 budget: $6.8 billion in appropriations.
OBBBA three-year impact: $410 million, that's 6% of one year's budget
spread over three years. This was manageable."
Instead of managing a temporary revenue dip that represented 5% of the budget, Governor Meyer chose to fundamentally alter Delaware's competitive position in the national business marketplace.
That wasn't fiscal necessity. That was political cowardice masquerading as responsible governance.
Follow the Money: Who Actually Benefits from HB 255?
Winners:
-
Politicians who avoided hard spending cuts
-
State employees whose positions weren't frozen
-
Special interests whose programs weren't reduced
-
Meyer's political future (he can claim he "solved" the crisis)
Losers:
-
Every business investing in R&D in Delaware
-
Every manufacturing company buying equipment
-
Every startup trying to grow
-
Delaware's long-term competitive position
-
The next governor who inherits this mess
Notice the pattern: the winners are political and immediate. The losers are economic and long-term.
The Reserve Trajectory: A Path to Crisis
The DEFAC documents reveal Delaware’s reserve funds are being systematically depleted:
Gap Analysis:
FY 2026: Revenue $6,857 million vs. Expenditure $7,218 million = $361million shortfall
FY 2027: Revenue $6,949 million vs. Expenditure $7,496 million = $547 million shortfall
Delaware is drawing down reserves at $350-550 million per year. At this trajectory, $980 million in reserves lasts approximately two years before Delaware faces an actual fiscal crisis, not a manufactured timing issue, but a genuine inability to meet obligations.
HB 255 slowed this trajectory slightly by extracting money from businesses. But it didn’t change the trajectory. Delaware is still spending more than it collects, still drawing down reserves, still heading toward a fiscal cliff.
Source: DEFAC Balance and Appropriations Worksheet, October and December 2025
"Delaware had $980 million in reserves.
OBBBA three-year impact: $410 million. That's 42% of reserves,
manageable with fiscal discipline while protecting long-term competitiveness."
XXII. The Spending Problem Nobody Wants to Discuss
Here's the context that makes this entire crisis even more infuriating: Delaware didn't face a revenue problem.
Delaware has a spending discipline problem.
"Delaware's General Fund spending grew $780 million from FY2021 to FY2025,
35.5% growth in four years. OBBBA's three-year challenge? $410 million.
Meyer prioritized spending growth over tax competitiveness."
From FY 2021 to FY 2025, Delaware's General Fund appropriations jumped from $4.525 billion to $6.129 billion, an increase of $1.604 billion, or 35.5% in just four years.
Looking at the Budget Act alone (excluding supplementals and bond bill cash), the increase was from $4.525 billion to $6.129 billion, still a 35.5% increase.
"The Chamber opposed it. The Roundtable opposed it.
The BioScience Association opposed it. The CPAs opposed it.
This was not partisan opposition. This was the business community's verdict."
The Full Spending Picture: The 35.5% figure represents Budget Act growth ($4,525.2M to $6,129.2M). But actual budgetary expenditures tell an even more concerning story:
Actual expenditure growth from FY2021 to FY2025: 54.0%, not 35.5%. Delaware’s spending explosion is even larger than the Budget Act figures suggest.
Source: DEFAC Expenditures Forecast, December 2025
If Delaware had limited spending growth to 3% annually (matching inflation),
FY2025 spending would be $483M lower than enacted.
That's more than the entire OBBBA impact. This was a choice.
Governor Meyer's "Innovation Economy" Speech
Published January 20, 2026, the Spotlight Delaware article revealed Governor Meyer's January 12, 2026 address to the Delaware State Chamber of Commerce exposes a fundamental contradiction at the heart of his economic policy.
Meyer claims to support an "innovation economy" and small business growth while having just signed HB 255, which the Delaware BioScience Association, Delaware Business Roundtable, and Delaware State Chamber of Commerce all warned would harm exactly those businesses.
Kurt Foreman's Departure
Kurt Foreman, the first and only CEO of the Delaware Prosperity Partnership since its 2017 founding, left Delaware in November 2025 to take a position in Ithaca, New York. Under Foreman, DPP supported 87 projects bringing $3.75 billion in capital investment and 11,500 jobs. His departure came after Meyer restructured the DPP board and shifted strategy away from corporate recruitment.
The departure of Delaware's top economic development official, weeks after Meyer signed HB 255, signals institutional instability. When your chief economic recruiter leaves for a job in a town of 100,000 people, that is a vote of no confidence.
"When your chief economic recruiter leaves for a town of 100,000 people,
that is not a career move. That is a verdict."
Meyer's Contradictory Economic Message
Meyer told the Chamber of Commerce: "We're sharpening the focus of the Delaware Prosperity Partnership to do more than recruit and retain big business. Recruiting and retaining big businesses are still important, but to help promising startups become truly investment-ready." Yet HB 255 specifically harms "small and startup science and technology businesses whose existence and immediate growth potential depends upon receiving the immediate benefit of R&D expensing," according to the Delaware BioScience Association.
Meyer claims to champion startups while having just signed legislation that startup advocates explicitly warned would harm startups. This is not a policy disagreement. It is a direct contradiction.
DiSabatino's Conditional Support
Brian DiSabatino, who publicly opposed HB 255 in November, is now quoted saying he's "optimistic" about Meyer's economic approach. However, his optimism is explicitly conditional: "I think my view reflects many others where we look forward to seeing that in action." DiSabatino's Ready in Six initiative focuses on deregulation, not tax policy. DiSabatino remains skeptical but diplomatic.
The phrase "seeing that in action" is business-speak for "prove it." The same business leader who warned HB 255 would cause "slower job growth, delayed expansions, and lost projects" has not changed his position on the bill.
Michael Fleming's Careful Praise
Michael Fleming, president of the Delaware BioScience Association, which opposed HB 255, told Spotlight Delaware: "Our membership is very supportive of the efforts by the governor and his administration and DPP to strengthen capabilities around the early-stage science and technology ecosystem." He also noted "one of the biggest challenges facing start-ups today, however, is early-stage investment."
Fleming praises Meyer's rhetoric while noting that startups need investment capital. HB 255 reduces cash available for investment by forcing deduction delays. Fleming's support is for Meyer's words, not his actions.
The $30 Million Merck Contradiction
Meyer's administration approved a $30 million taxpayer-backed grant to Merck for a $1 billion campus, despite Meyer's stated opposition to "chasing major projects" with taxpayer funds. The article notes: "That notably comes after a year that saw his administration sign off on one of the largest taxpayer-backed incentives in state history."
Meyer gives $30 million to a pharmaceutical giant while signing HB 255 to extract $328 million from businesses of all sizes. The message: big corporations get grants, small businesses get tax increases. This is the opposite of his stated "innovation economy" focus.
Delaware Prosperity Partnership Leadership Vacuum
The Delaware Prosperity Partnership is conducting a national search for Foreman's replacement. Becky Harrington serves as interim CEO. The new CEO will be "responsible for executing the new vision," according to the article. Rob Herrera, founder of The Mill co-work space, was appointed co-chair by Meyer.
Delaware's economic development agency has no permanent leader. The person hired to recruit businesses will arrive in a state that just broke 68 years of tax conformity, watched its top economic official leave, and now ranks 50th in corporate tax treatment. Good luck with that recruitment pitch.
The bottom line: Meyer's January 2026 "innovation economy" speech is not evidence of a new direction. It is evidence of a contradiction. He signs HB 255 to extract money from startups, then claims to support startups. He gives $30 million to Merck, then claims to oppose chasing big corporations. He loses his top economic recruiter, then claims Delaware is open for business. The speech proves the report's thesis: Meyer prioritizes political messaging over economic reality.
"Meyer claims to champion innovation while taxing innovators.
He claims to support startups while signing legislation startup
advocates warned would harm them. He claims Delaware is open
for business while his top economic recruiter leaves for Ithaca.
The 'innovation economy' is a speech. HB 255 is the policy.
Speeches do not create jobs."
RETURN TO TABLE OF CONTENTS
XXIII. The Spending Counterfactual
That's nearly DOUBLE the supposed $410M OBBBA "crisis."Delaware's spending explosion created the vulnerability that made a timing issue look like an emergency.
Scenario:
-
FY25 Spending if spending grew at inflation + population (4%): $5.35 billion
-
Actual FY25 spending: $6.13 billion
-
Difference: $780 million
That's nearly DOUBLE the $410M OBBBA "crisis."
If Delaware spending had grown at inflation + population growth (approximately 4% annually) instead of the actual 35.5% over four years:
Even looking at the more conservative measure, actual expenditures rather than appropriations, Delaware spending grew 11.1% from FY 2024 to FY 2025, from $6.2 billion to $6.9 billion.
"Dead last. Fiftieth out of fifty states in corporate tax treatment.
The Tax Foundation's verdict is in. The damage is in the data."
At the October DEFAC meeting, a council member directly asked Cabinet officials: "Is there any work being done around the problem of slowing revenue and increasing expenditures?"
The response was that "the Administration is aware and is looking into this."
"Looking into this." Translation: No plan. No action. Just awareness that they've spent Delaware into a corner where a temporary $410 million timing adjustment creates an "emergency."
The December 2025 DEFAC data shows some modest reductions from October projections:
-
Salaries: Down $17.7M from October forecast (but driven by lower teacher enrollment, not fiscal discipline)
-
Total FY26 expenditures: $7.218 billion (down $31.7M from October)
-
But FY27 expenditures still projected at $7.496 billion, a continued growth trajectory
If Delaware had maintained even modest spending discipline over the past four years, if we'd grown spending
at 4-5% annually instead of 35% cumulatively, the OBBBA timing shock would have been a budget footnote, not
a legislative crisis requiring an extraordinary session and fundamental policy reversal.
"HB 255 creates dual compliance: one set of books for federal taxes,
another for Delaware. For companies operating in multiple states,
Delaware just became the most administratively burdensome jurisdiction."
RETURN TO TABLE OF CONTENTS
XXIV. The Three Risks Delaware Is Now Carrying: The Economic Theory Behind Why This Matters
From a financial and economic perspective, Delaware just traded real investment incentives and competitive positioning for a short-term budget patch. That trade carries three structural risks:
"Risk #1: Businesses will leave or not expand here.
Risk #2: Startups will incorporate elsewhere.
Risk #3: Delaware's Chancery reputation damage + 50th/50
tax ranking = companies can't justify Delaware anymore."
1. Reputational Risk
State and business press are already warning that decoupling makes Delaware less attractive and more unpredictable. Articles in both state and business press are already raising alarms that Delaware's decoupling will make it less attractive and more unpredictable for businesses choosing where to grow.
In a world where capital is mobile and tax policy is a key differentiator, reputation is a hard asset. We've begun chipping away at ours. Delaware has begun to chip away at it.
"He could have used the reserves. He could have restrained spending.
He could have shown leadership. He chose extraction instead."
2. Policy Volatility Risk
HB 255 is designed to run through 2030 and then snap back unless lawmakers act again. That means businesses now face:
-
One set of rules today
-
Another possible regime in 2030
-
No clear promise of what comes next
Volatility in tax rules is terrible for long-term investment planning. Firms discount jurisdictions where the rules may change every time there is a short-term budget scare.
The Constitutional Wall: Delaware’s 98% Appropriation Limit
Delaware operates under a constitutional appropriation limit that caps state spending. The December 2025 DEFAC data reveals just how close to that wall Delaware already sits:
-
FY 2027 98% Appropriation Limit: $7,098.0 million
-
FY 2027 Benchmark Appropriation: $7,071.2 million
-
Extraordinary Revenues: $26.8 million
Delaware is operating at 98.6% of its constitutional appropriation limit. There is almost no fiscal headroom remaining.
This context makes HB 255 look even more like political accounting rather than genuine fiscal management. Meyer didn’t solve a crisis, he bought time at the expense of Delaware’s competitive position while the constitutional spending wall approaches. The fundamental imbalance between expenditure commitments and revenue capacity remains unaddressed.
Source: DEFAC Balance and Appropriations Worksheet, December 2025
3. Growth Risk
By dulling the benefit of full expensing and retroactive deductions, Delaware is effectively saying: "We want the revenue benefit of your profits, but we're not willing to fully match the federal incentives for your investments."
Over time, that erodes:
-
Capital formation
-
Productivity growth
-
Delaware's share of high-value corporate activity
That's how you get lower growth, even if you temporarily preserve a line item on the revenue projections.
"HB 255 expires December 31, 2030. That creates 5 years of policy uncertainty.
Companies making 20-year R&D facility decisions can't plan around
temporary tax rules. Delaware just became uninvestable."
Why Static Revenue Scoring Misses the Point
DEFAC's revenue projections use static scoring, they assume no behavioral response to tax policy changes. In this model, HB 255 "saves" $336M because it delays when businesses take deductions, with no offsetting effects.
But dynamic scoring, which accounts for behavioral responses, tells a different story:
• Reduced in-state investment → lower future corporate profits taxable in Delaware
• Slower job growth → lower personal income tax collections
• Reduced business activity → lower gross receipts tax revenue
• Facilities built elsewhere → zero tax benefit to Delaware
The true long-run revenue cost of HB 255, accounting for reduced economic activity, likely exceeds the claimed
$73M in "savings". Delaware traded short-term revenue accounting for long-term growth trajectory.
The Political Economy: Why Bad Policy Persists
This is a classic public choice problem: concentrated benefits versus diffuse costs. Politicians get the concentrated benefit, they avoided hard budget choices, preserved spending flexibility, and can claim they "solved" a $400M crisis. The costs, slightly higher accounting expenses for many businesses, marginally worse competitiveness, incrementally higher barriers to expansion, are diffuse.
No single firm is hit hard enough to lobby aggressively against it.
This is precisely how suboptimal policy persists: the people who benefit politically face organized resistance only after damage accumulates over years, when it's too late to reverse course.
"The Tax Foundation: 'R&D-intensive sectors, which are the foundation
of Delaware's high-value economic strategy, will face the steepest
relative costs.' HB 255 targets Delaware's growth sectors."
XXV. DEFAC's Static Scoring vs. Economic Reality: The Budget Reality → We Could Have Afforded the Right Choice
What DEFAC Assumes:
-
Businesses pay more tax → Revenue increases $336M
-
No behavioral change
-
No economic effects
What Actually Happens:
-
Businesses invest less in Delaware → Lower future corporate tax
-
Businesses hire fewer people → Lower income tax
-
Businesses grow slower → Lower gross receipts tax
-
Businesses build elsewhere → ZERO Delaware tax benefit
DEFAC's "savings" ignore every dollar Delaware WON'T collect because investment moves elsewhere.
The Dynamic Reality: What DEFAC’s Static Scoring Misses
DEFAC’s revenue projections assume no behavioral response to tax policy changes. Academic literature on corporate location decisions tells a different story.
Research by Giroud and Rauh demonstrates that corporate tax differentials materially impact where firms locate mobile operations. Studies consistently show that tax differentials of 3-5 percentage points influence marginal site selection decisions, where to build the next R&D lab, which state gets the manufacturing expansion, where to locate back-office functions.
HB 255 created exactly such a differential between Delaware and conforming states.
Dynamic revenue effects DEFAC doesn’t capture:
Reduced in-state investment → lower future corporate profits taxable in Delaware
Slower job growth → lower personal income tax collections
Reduced business activity → lower gross receipts tax revenue
Facilities built elsewhere → zero tax benefit to Delaware
A reasonable estimate of dynamic revenue losses, accounting for behavioral responses, suggests the true long-term cost of HB 255 exceeds the “savings” DEFAC projects. Delaware traded short-term revenue accounting for long-term growth trajectory. That trade doesn’t show up in static projections, but it compounds over decades.
"I watched Meyer do this to New Castle County for eight years. I warned. I was outvoted. I was proven right. Now he is doing it to Delaware."
XXVI. The Operating Deficit DEFAC Revealed
The DEFAC documents reveal a fiscal reality far more troubling than the HB 255 debate suggests. Delaware is not just facing a timing issue, Delaware is running a structural operating deficit.
December 2025 DEFAC Balance Sheet: FY 2026 Revenues: $6,856.9 million
FY 2026 Expenditures: $7,218.3 million
Operating Balance: NEGATIVE $361.4 million
Delaware is spending $361.4 million more than it collects in FY2026. This deficit is being covered by drawing down prior year cash balances. The October 2025 projection showed an even worse picture: an operating balance of NEGATIVE $565.9 million.
What This Means: Delaware’s fiscal problem isn’t the OBBBA timing adjustment. Delaware’s fiscal problem is that the state spends more than it takes in, and has been drawing down reserves to cover the difference. HB 255 doesn’t solve this; it merely delays the reckoning while sacrificing Delaware’s competitive position.
Source: DEFAC Balance and Appropriations Worksheet, December 2025
What comes Next: A Probability Assessment
Based on the DEFAC trajectory data, here is a realistic assessment of Delaware’s fiscal future:
Short-Term (FY 2026-2027):
Revenue growth: 1.3-2.4% annually
Expenditure growth: 3.8-4.2% annually
Operating deficit: $361-547 million annually
Reserve depletion: $350-550 million annually
Probability Assessment:
The Pattern Is Clear: Delaware faces a structural mismatch between expenditure commitments (driven by healthcare, salaries, and pensions) and revenue sources (dependent on volatile corporate taxes and a franchise tax model threatened by corporate departures). Without genuine structural reform, not political accounting like HB 255, tax increases are nearly inevitable.
HB 255 didn’t prevent that future. It merely delayed it while damaging Delaware’s ability to grow its way out of the problem.
"Meyer had alternatives: modest spending restraint
(3% annual growth would have freed $483M), reserve utilization,
or targeted revenue measures that didn't break 68 years of tax policy.
He chose the nuclear option instead."
XXVII. The Two Delaware's Grants for Giants → Taxes for Everyone Else
"Delaware gave away 27 years of corporate welfare in 27 days. Merck gets $30 million. Small businesses get $328 million extracted. If you are big enough, Delaware gives you money. If you are small enough to need R&D expensing, Delaware takes your money."
Delaware operates two economic systems. One gives taxpayer money to corporations. The other takes taxpayer money from corporations. The same state that handed $30 million to Merck signed HB 255 to extract $328 million from businesses of all sizes. The same state that reduced Amazon's property taxes by $2.5 million doubled homeowners' property taxes. The same state that classified Bloom Energy's natural gas fuel cells as 'renewable' to justify $405 million in ratepayer subsidies now claims it cannot afford to let businesses deduct R&D expenses in the same year they occur.
The Math Does Not Lie
Since 1997, Delaware has provided approximately $500 million in taxpayer-funded grants and subsidies to corporations (Good Jobs First, 2025). HB 255 extracts $410 million from businesses over three years. Delaware gave away nearly three decades of corporate welfare in a single legislative session.
Delaware's Corporate Welfare Hall of Fame
Sources: Delaware Business Times (2021, 2025); Spotlight Delaware (2025); Good Jobs First (2025); A Better Delaware (2020, 2025)
The Bloom Energy Scandal
In 2011, Delaware classified Bloom Energy's fuel cells as 'renewable energy' despite using natural gas and producing toxic byproducts. The University of Delaware built a 240,000 square foot facility that Bloom occupies at $1 per year rent. Ratepayers pay a surcharge on every electric bill that has transferred more than $405 million to Bloom Energy since 2012 (A Better Delaware, 2025). Bloom promised 900 jobs by 2016. By late 2019, Bloom employed 340 workers. State legislators called the deal 'a hell of an expensive lesson picking winners and losers' (A Better Delaware, 2020). The surcharges continue until 2033.
That is $470,000 per job in ratepayer subsidies. For a company that still has not delivered on its promises.
The Amazon Property Tax Scandal
In the 2025 New Castle County property reassessment, Amazon's state-of-the-art Boxwood distribution center was assessed at $108 million, despite being purchased by an Australian investment firm for $392 million in 2023. This valuation resulted in what Spotlight Delaware called 'the single largest tax break of any property in the state at more than $2.5 million' (Spotlight Delaware, 2025). Meanwhile, homeowners in the same county saw their property tax bills double or triple. The GM plant that previously occupied the Boxwood site paid nearly $1 million annually in property taxes to the Red Clay Consolidated School District. The Amazon facility pays approximately $250,000.
"Amazon gets a $2.5 million property tax break. Homeowners get their bills doubled. That is the two-tier economy Matt Meyer built in New Castle County. Now he is building it statewide."
"Amazon gets a $2.5 million property tax break. Homeowners get their bills doubled. That is the two-tier economy Matt Meyer built in New Castle County.
Now he is building it statewide."
The Merck Contradiction
In February 2025, Governor Meyer's administration approved a $30 million taxpayer-backed grant to Merck, one of the world's largest pharmaceutical companies with a market cap of $200 billion, for a $1 billion campus near Wilmington (Spotlight Delaware, 2025). Nine months later, Meyer signed HB 255, extracting $328 million from businesses of all sizes by forcing them to delay tax deductions.
Consider the math. Merck, a company with $60 billion in annual revenue, receives $30 million in taxpayer money. Delaware's small and mid-sized businesses, collectively, have $328 million extracted through HB 255. The ratio is roughly 11 to 1 against local businesses.
Meyer claimed in January 2025 that Delaware would not focus on 'chasing major projects' with taxpayer funds (Owens, 2026). Ten months later, he signed HB 255 while sitting on the largest taxpayer-backed corporate incentive in state history.
"Delaware gave away 27 years of corporate welfare in 27 days.
Merck gets $30 million. Small businesses get $328 million extracted.
If you are big enough, Delaware gives you money. I
f you are small enough to need R&D expensing, Delaware takes your money."
RETURN TO TABLE OF CONTENTS
XXVIII. The Small Business Lie: What Delaware Actually Offers
Meyer promised to be Delaware's small business governor. Then he handed Merck $30 million in a single check. That is more than twice what 110 small businesses received over five years combined through the EDGE grant program. That is not supporting Main Street. That is writing blank checks to Wall Street.
Governor Meyer claims to champion small business. The numbers tell a different story.
"Meyer promised to be Delaware's small business governor.
Then he handed Merck $30 million in a single check. That is more than twice what 110 small businesses received over five years combined through the EDGE grant program. That is not supporting Main Street. That is writing blank checks to Wall Street."
The EDGE Grant Reality
Delaware's flagship small business program is the EDGE Grant Competition (Encouraging Development, Growth & Expansion). Launched in 2019 under Governor Carney, EDGE has awarded $7.25 million to 110 businesses through Fall 2024 (News.delaware.gov, 2024). STEM companies receive up to $100,000. Entrepreneur Class companies receive up to $50,000. There are two rounds annually.
The Meyer administration increased the 2025 allocation to $1.15 million for a single EDGE 2.0 round (News.delaware.gov, 2025). That sounds like progress until you do the math.
Small Business vs. Corporate Welfare: The Numbers
Sources: News.delaware.gov (2024, 2025); Delaware Business Times (2025); Spotlight Delaware (2025)
The SSBCI Failure
Delaware received $60.9 million in federal funding through the State Small Business Credit Initiative in 2023 (News.delaware.gov, 2025). The state must spend 80% of each allocation to access the next round. As of April 2025, only $2.0 million had been distributed. That is 3.3% of available federal funding sitting unused while Meyer signed HB 255 claiming fiscal necessity.
The Meyer administration launched an 'urgent push' to distribute $14 million by December 2025 (News.delaware.gov, 2025). Urgent. After the money sat unused for two years while Meyer claimed Delaware could not afford to let businesses deduct R&D expenses.
"$60.9 million in federal small business funding. $2 million distributed in two years. Meyer signed HB 255 claiming fiscal necessity while leaving $58 million in small business aid untouched. That is not fiscal responsibility. That is political theater."
"$60.9 million in federal small business funding. $2 million distributed in two years. Meyer signed HB 255 claiming fiscal necessity while leaving $58 million in small
business aid untouched. That is not fiscal responsibility. That is political theater."
Governor Matt Meyer’s treatment of small/medium businesses versus large corporations:
The findings reveal a systematic two-tier economy where large corporations receive direct grants while small businesses face tax extraction through HB 255.
Key Findings:
1. Delaware Small Business Programs: The Full Inventory
A. EDGE Grant Competition (State Program)
Source: News.delaware.gov (2024, 2025); Business.delaware.gov (2025)
-
Program Launch: 2019 under Governor Carney
-
Total Awarded (2019-2024): $7.25 million to 110 businesses
-
EDGE 2.0 (2025 under Meyer): $1.15 million single round
-
Grant Amounts:
-
STEM companies: Up to $100,000
-
Entrepreneur Class: Up to $50,000
-
-
Eligibility: Less than 7 years operation, 10 or fewer employees, 51%+ Delaware-based
-
Match Requirement: 3:1 state match
-
Success Rate: 95 of 110 recipients still operating post-pandemic
Critical Finding: The single Merck grant ($30.2 million) exceeds the ENTIRE EDGE program history by 4x.
B. State Small Business Credit Initiative (SSBCI) - Federal
Source: News.delaware.gov (2025)
-
Federal Allocation: $60.9 million (2023)
-
Structure: Three tranches; must spend 80% to access next round
-
Distributed as of April 2025: $2.0 million (3.3%)
-
Meyer “Urgent Push”: $14 million target by December 2025
-
Programs Funded:
-
Delaware Loan Participation Program
-
Delaware Capital Access Program
-
Accelerator Program
-
Seed Capital Program
-
-
Critical Finding: Meyer signed HB 255 claiming fiscal necessity while $58.9 million in federal small business aid sat unused.
C. Delaware Strategic Fund
Source: Business.delaware.gov (2025); Delaware Business Times (2025)
-
Administrator: Council on Development Finance
-
FY2025 Allocation: $5 million (down from $9.5 million in FY2024)
-
Redirection: $3 million shifted to EDGE grants
-
Primary Use: Business retention and expansion
-
Note: Meyer claimed to “de-emphasize” large corporate grants, then approved $30.2M for Merck
D. Other Small Business Programs
E. Tax Credits Available to Small Business
2. Large Corporation Subsidies: The Hall of Shame
A. Merck & Company (2025) - APPROVED UNDER MEYER
Sources: Spotlight Delaware (2025); Delaware Business Times (2025)
-
Total Grant: $30.2 million (largest in 8+ years)
-
Job performance grant: $4.7 million (375 jobs by 2030)
-
Capital expenditure grant: $25 million
-
-
Company Investment: $900 million facility
-
Location: Chestnut Run Innovation & Science Park
-
Approval Date: February 2025
-
Lease Signed: March 2025 (20-year term)
-
Meyer’s Defense: “Negotiated under predecessor” (but signed as sitting governor)
Critical Contradiction: Meyer claimed January 2025 he would “de-emphasize cash assistance” and not “chase major projects.” One month later, he approved the largest corporate grant in recent Delaware history.
B. WuXi STA Pharmaceutical (2021)
Sources: Delaware Business Times (2021); Spotlight Delaware (2024)
-
Total Grant: $19 million
-
Capital expenditure: $15.3 million
-
Job performance: $3.25 million (479 jobs by 2026)
-
Training: $500,000
-
-
Company Investment: $515 million Middletown campus
-
Status: Under Congressional scrutiny (BIOSECURE Act)
-
Disbursed to Date: $3.6 million
-
Risk: Federal legislation may blacklist Chinese biotech companies
C. Amazon Fulfillment Center (2020)
Sources: Delaware Public Media (2020); Philadelphia Inquirer (2020); Spotlight Delaware (2025)
-
Strategic Fund Grant: $4.5 million
-
Property Tax Assessment: $108 million (purchased for $392 million)
-
Property Tax Reduction: $2.5 million annually
-
Jobs: 1,000 workers
-
Previous Occupant (GM): Paid ~$1 million/year to Red Clay Schools
-
Amazon Facility: Pays ~$250,000/year
Critical Finding: Amazon received a 75% reduction in property taxes while homeowners in the same county saw bills double or triple.
D. Bloom Energy (2011) - THE CAUTIONARY TALE
Sources: A Better Delaware (2020, 2025); Delaware Public Media (2017)
-
State Grant: $16.5 million
-
Ratepayer Subsidies: $405+ million (surcharges until 2033)
-
UD Facility Rent: $1/year for 240,000 sq ft
-
Jobs Promised: 900 by 2016
-
Jobs Delivered: 302-340
-
Cost Per Job: $470,000+ in ratepayer subsidies alone
-
Product: Natural gas fuel cells classified as “renewable” by Delaware
Quote: State legislators called it “a hell of an expensive lesson picking winners and losers.”
E. Fisker Automotive (2010) - THE FAILURE
-
Grant: $21.5 million
-
Promise: Electric vehicle manufacturing
-
Result: Never made a single car in Delaware
-
Status: Bankrupt 2013
-
Recovery: Most funds lost
F. Corteva (2025)
Source: Spotlight Delaware (2025)
-
Grant: $1.5 million
-
Purpose: Stay in Wilmington, move downtown
-
Company Cash Position: $2 billion
-
Analysis: A company with $2 billion cash received taxpayer money to relocate within the same city
3. Meyer's Economic Development Record: The Contradiction
As New Castle County Executive (2017-2024)
Accomplishments Claimed:
-
Launched NCCinnovates entrepreneurship program
-
Reduced vacant properties by 400+ in 400 days
-
Collected record $16 million in delinquent taxes
-
Announced projects supporting 9,780 jobs
-
Received $11 million SIPPRA federal award
Corporate Support Record:
-
Supported WuXi STA project (2021): “We win the future by attracting global leading healthcare firms”
-
Supported Amazon project (2020): County Executive during property tax assessment
As Governor (January 2025-Present)
Rhetoric (January 2025 Chamber Speech):
-
“In my administration, you’re going to see the use of this cash assistance de-emphasized. Let’s focus our resources on things that matter the most to the companies and employees of today and tomorrow.”
-
“Companies that only consider money are not concerned about the most important thing: quality of life.”
Actions (Within First Year):
1. February 2025: Approved $30.2 million Merck grant (largest in 8+ years)
2. October 2025: Approved $1.5 million Corteva grant
3. November 2025: Signed HB 255 extracting $328 million from businesses
4. November 2025: Lost Kurt Foreman, DPP CEO
5. January 2026: Gave “innovation economy” speech claiming startup focus
4. The Ratio Analysis
Corporate Grants vs. Small Business Support
RETURN TO TABLE OF CONTENTS
XXIX. The Innovation Economy Lie
"Meyer's innovation economy is a speech, not a strategy. You cannot build an innovation economy by taxing innovation. Speeches do not create jobs."
Two months after signing HB 255, Governor Meyer stood before the Delaware State Chamber of Commerce on January 12, 2026, and declared his commitment to an 'innovation economy' focused on startups (Owens, 2026). The same startups the Delaware BioScience Association warned would be harmed by HB 255. The same startups that depend on immediate R&D expensing. The same startups Meyer claims to champion while signing legislation that extracts their capital.
You cannot build an innovation economy by taxing innovation. You cannot support startups by forcing them to delay deductions that fund their growth. You cannot recruit businesses while your top economic development official leaves for Ithaca, New York.
"Meyer's innovation economy is a speech, not a strategy.
You cannot build an innovation economy by taxing innovation.
Speeches do not create jobs."
Kurt Foreman's Verdict
In November 2025, Kurt Foreman, the only CEO the Delaware Prosperity Partnership has ever known, left Delaware for a position in Ithaca, New York (Delaware Business Times, 2025). Under Foreman, DPP supported 87 projects that brought $3.75 billion in capital investment and 11,500 jobs. He departed weeks after Meyer restructured the DPP board and signed HB 255.
When your chief economic recruiter leaves for a town of 100,000 people, that is not a career move. That is a verdict.
Foreman spent eight years building Delaware's recruitment apparatus. He chose not to stay and execute Meyer's 'new vision.' The DPP is now conducting a national search for his replacement (Delaware Business Times, 2025). The new CEO will inherit a state ranked 50th in corporate tax treatment and a governor who gives $30 million grants to pharmaceutical giants while extracting $328 million from businesses of all sizes.
The Business Community Sees Through It
Brian DiSabatino, President of the Delaware Business Roundtable, who publicly opposed HB 255 in November 2025, now offers only conditional optimism about Meyer's economic approach. His words in January 2026: 'I think my view reflects many others where we look forward to seeing that in action' (Owens, 2026). That is business-speak for 'prove it.' The same business leader who warned HB 255 would cause 'slower job growth, delayed expansions, and lost projects' has not changed his position on the bill.
Michael Fleming, president of the Delaware BioScience Association, which opposed HB 255, offers careful praise for Meyer's rhetoric while noting 'one of the biggest challenges facing start-ups today is early-stage investment' (Owens, 2026). HB 255 reduces cash available for investment by forcing deduction delays. Fleming's support is for Meyer's words, not his actions.
"When your chief economic recruiter leaves for a town of 100,000 people,
that is not a career move. That is a verdict."
RETURN TO TABLE OF CONTENTS
XXX. By the Number: Meyer's Two-Tier Economy
What Large Corporations Received Under Meyer
What Small Businesses Received Under Meyer
The Bottom Line
This is not an innovation economy. This is a two-tier economy where the rules depend on your size and your political connections. If you are large enough to command a seat at the Council on Development Finance, you receive taxpayer money. If you are small enough to need immediate R&D deductions to survive, you pay more.
The BioScience Association's members are 'mostly small biotech companies with five or fewer employees' (Owens, 2026). They opposed HB 255 because it harms exactly those companies. Meanwhile, their largest member, Merck, receives a $30 million grant.
Large corporations receive grants. Small businesses receive tax increases. That is the two-tier economy HB 255 creates.
"Single Merck grant: $30.2 million.
Entire EDGE program history (5 years, 110 businesses): $7.25 million.
The ratio is 4 to 1 in favor of a single corporation over 110 small businesses combined.
That is Meyer's innovation economy."
RETURN TO TABLE OF CONTENTS
XXXI. The Bottom Line: Politics Over Economics
Governor Meyer will claim he "saved" Delaware's budget from a $400 million crisis.
The December DEFAC meeting gave him the numbers to make that case: HB 255 added $365 million back to revenue projections through FY 2028.
"Governor Meyer chose the politically easy path over the economically
sound one. He avoided budget restraint by breaking tax conformity.
He prioritized three years of accounting convenience over decades
of competitive advantage."
But here's what actually happened:
-
He turned a manageable $410M timing shock (5% of budget, spread over 3 years) into a permanent competitiveness problem
-
He broke Delaware's 60+ year practice of federal tax conformity to avoid making hard budget choices
-
He ignored warnings from Delaware's business community, national tax experts, and even his own
DEFAC members
-
He had nearly $1 billion in reserves specifically designed to buffer revenue volatility, and chose not to
use them
-
He punished mid-sized and growing businesses to preserve political spending priorities
-
He sacrificed Delaware's long-term growth for a better three-year spreadsheet
The DEFAC documents confirm a fiscal reality worse than even this report initially described:
-
Delaware has a structural operating deficit of $361.4 million, the state spends far more than it collects
-
Delaware is operating at 98.6% of its constitutional appropriation limit, there is virtually no fiscal headroom
-
Reserves are being depleted at $350-550 million annually, at current trajectory, they last approximately two years
-
Medicaid is growing at 10-12% annually while revenues grow at 2-3%, this is the real structural crisis
-
Expenditure growth (4.2%) consistently exceeds revenue growth (2.4%), the gap is widening
HB 255 addresses none of these structural problems. It extracts money from businesses to delay the reckoning while sacrificing Delaware’s competitive position, the very asset that could help Delaware grow its way to fiscal sustainability.
"This wasn't about saving Delaware's budget. This was about avoiding hard choices.
And Delaware businesses, will pay the price for years to come."
While Delaware scrambled to reform its corporate code with Senate Bill 21 to stop the 'Dexit' exodus after the
Musk case, Meyer simultaneously passed HB 255, breaking 68 years of tax conformity and sending exactly the opposite message. You can't rebuild business confidence while breaking business promises.
The argument is clear:
-
The projected $400M shortfall was real, but mostly about timing, not economic collapse
-
HB 255 "fixes" the spreadsheet, not the structure. It narrows the shortfall by stretching deductions over time,
but does nothing to fix Delaware's over-reliance on volatile corporate income tax
-
Decoupling undermines the core Delaware value proposition: predictable, aligned, business-friendly tax rules
-
The move creates long-run drag on investment and small-business growth through dual compliance, reduced
timing benefits, and uncertainty through 2030
-
Politically, leaders can claim they "saved" the budget, but economically, they've shifted risk from the state's
balance sheet onto the private sector's growth trajectory
"Delaware's business community warned him. The Tax Foundation warned him. DEFAC's own members raised concerns. He had $980 million in reserves and manageable spending growth to work with. Meyer chose HB 255 anyway."
The real cost won't show up in DEFAC projections. It will show up in:
-
The biotech startup that locates in North Carolina because Delaware's R&D treatment is now less favorable
-
The manufacturer that expands in Pennsylvania because Delaware's dual compliance doesn't pencil out
-
The mid-sized firm that quietly relocates because policy uncertainty makes planning impossible
-
The national reputation damage from ranking 50th out of 50 states in corporate tax treatment
Those costs don't show up on three-year budget projections. They compound over decades. They erode the economic foundation that has sustained Delaware for generations.
When economic development isn't happening, when the business that would have come doesn't, when the expansion that would have occurred goes elsewhere, you don't see a line item in a budget. You just see slower growth, fewer opportunities, and diminished potential.
"Structural deficits aren’t born from one decision,
but from a hundred hidden ones."
Delaware could have managed a temporary $410 million timing shock with the $980 million in reserves we already had, with fiscal discipline instead of patronage hiring, and emerged with our competitive advantages intact.
Instead, Governor Meyer changed the rules, kept the revenue, and put our long-term growth, our small businesses, and our reputation on the line.
I watched Meyer make the same fiscal decisions in New Castle County for eight years.
I warned about structural unsoundness. I was outvoted by his supermajority. I was proven right when the county became structurally unsound.
Now he's doing it to Delaware."
HB 255 sunsets in 2030. The next legislature will have a choice: extend the mistake or restore 68 years of policy. Delaware's business community should make clear which choice they expect.
"This was not about saving Delaware's budget. This was about avoiding hard choices. Delaware businesses will pay the price for years to come."
 |  |  |
|---|---|---|
 |  | |
The Truthline Network Publication Attachments List for This Report
For the growing number of readers that enjoy the deep dives, explainers, and additional information, below are five PDF's supplementing this report to view or download.
[PDF 1] ABOUT KAREN HARTLEY-NAGLE: The Council President Who Saw the Pattern Coming
What you will find here: 1 or two sentence description
[Click here to read the full document]
[PDF 2] THE EXODUS: How Delaware Lost $2+ Trillion in 23 Months
What you will find here: 28+ Companies Fled After Chancery Ruling. Then Meyer Made It Permanent With HB 255
[Click here to read the full document]
[PDF 3] THE MUSK FACTOR: How Elon Musk's Delaware Exodus Validates My Warning
What you will find here: 1 or two sentence description
[Click here to read the full document]
[PDF 4] DELAWARE SUPREME COURT MUSK DECISION QUOTES
What you will find here: Key Quotes from the Delaware Supreme Court Elon Musk Decision. The Court Acknowledged the Chancery Court overstepped
[Click here to read the full document]
[PDF 5] QUOTE VERIFICATION DOCUMENT
What you will find here: All quotes verified, sourced, and attributed. For media use and public reference.
[Click here to read the full document]
"We make it easy to verify. We make it hard to misquote."
Appendix: Key DEFAC Figures for Reference
December 2025 DEFAC Data Summary
Revenue (FY 2026):
Net Receipts: $6,856.9 million
Corporate Income Tax (Gross): $413.3 million
Personal Income Tax (Net): $2,532.8 million
Franchise Tax: $1,328.9 million
Gross Receipts Tax: $420.1 million
Expenditures (FY 2026):
Total: $7,218.3 million
Salaries: $2,202.4 million
Medicaid: $1,217.0 million
Fringe Benefits: $824.8 million
Pension: $594.1 million
Reserves (FY 2026):
Budget Reserve Account: $366.5 million
Budget Stabilization Fund: $469.3 million
2% Set Aside: $144.6 million
Total: $980.4 million - Reserve Ratio: 13.4%
Key Ratios:
Operating Balance: -$361.4 million
Appropriation Limit Utilization: 98.6%
Expenditure Growth: 4.2%
Revenue Growth: 2.4%
Source: Delaware Economic & Financial Advisory Council, December 2025 Meeting Materials
"Every fiscal collision begins the same way:
not with bad math, but with leaders who hide the math."
RETURN TO TABLE OF CONTENTS
RETURN TO TABLE OF CONTENTS
Read full documents → Sources above
Attribution:
Content and analysis © 2025 The Truthline Network, a division of Nexus Innovation Group LLC.
All content authored by Karen Hartley-Nagle, Founder & Publisher, The Truthline Network; Editor-in-Chief, Host & Executive Producer, The Truthline (Radio & Live); Former President, New Castle County Council (2016–2024); Founder & CEO, Nexus Innovation Group, LLC.
Excerpts, data, or quotations may be reproduced for noncommercial use with attribution to The Truthline Network and a direct link to the original report. Commercial use or republication requires written permission.
Cite as: Hartley-Nagle, K. (2025, December 5). Delaware's $410 Million Mistake: How Governor Meyer Chose Politics Over Delaware's Economic Future. The Truthline Network. https://www.karenhartleynagle.com/delawares-410-million-tax-mistake-how-governor-meyer-chose-politics-over-delawares-economic-future
"Transparency isn’t charity. It’s the rent you pay for power
Read the Audit Reckoning Series:
Report 1 | Report 2 | Report 3 | Report 4 | Coming Soon: Report 5
RETURN TO TABLE OF CONTENTS
THE TRUTHLINE NETWORK
"Truth doesn't whisper. It breaks through."
"The Signature That Made Delaware the Worst State in America to Run a Corporation"
Governor Matt Meyer signs House Bill 255, decoupling Delaware from 68 years of federal tax conformity.
Delaware business groups warned him this would drive companies away. He signed it anyway.
Timeline: 1954-2026
DELAWARE HB 255 TIMELINE: HOW GOVERNOR MEYER MADE DELAWARE LAST IN THE NATION
A CHRONOLOGICAL RECORD OF DECISIONS THAT DAMAGED DELAWARE'S COMPETITIVENESS
1954 - 2022
2018 - 2023
March 21, 2018
2022
July 2024
2024
January 30, 2024
February 2024
February - November 2024
June 2024
November 5, 2025
2025
October 30, 2025
Late October 2025
November 7, 2025
November 13, 2025
November 19, 2025
December 2025
December 15, 2025
December 15, 2025
December 19, 2025
HISTORICAL CONTEXT: 68 YEARS OF STABILITY (1954-2022)
1954-2022: The Era of Tax Conformity
-
68 consecutive years: Every state with corporate income tax allowed immediate R&D expensing
-
12 Presidents (7 Democrats, 5 Republicans)
-
34 Congresses
-
4 Major Recessions
-
Multiple Crises Survived: Dot-com crash, 2008 financial crisis, COVID pandemic
-
Result: Predictable, stable tax policy that attracted business investment
Delaware maintained federal conformity through all of this—until Governor Meyer.
2018-2023: FEDERAL TAX POLICY BACKGROUND
March 21, 2018: Tesla Shareholders Approve Musk Compensation
-
Tesla Board approves Elon Musk's performance-based compensation package
-
12 tranches of stock options tied to market cap and operational milestones
-
73% of shareholders (excluding Musk family) vote in favor
-
Package eventually valued at $56 billion
2022: Federal Tax Law Changes Begin
-
Congress begins work on tax code modifications
-
R&D expensing provisions under discussion
-
Delaware continues conformity with federal tax code
July 2024: Trump Signs "One Big Beautiful Bill Act" (OBBBA)
-
Allows immediate deduction of R&D expenses (retroactive to 2022)
-
Allows immediate deduction of equipment/property investments
-
Makes bonus depreciation permanent
-
49 other states maintain conformity with federal law
-
Delaware will soon break from 68 years of policy
2024: THE MUSK EXODUS BEGINS
January 30, 2024: Delaware Chancery Court Voids Musk Compensation
-
Chancellor Kathaleen St. Jude McCormick rules Musk's $56B pay package unfair
-
Finds Tesla board failed to prove compensation was fair to shareholders
-
Orders complete rescission of the 2018 compensation plan
-
Immediate Result: Musk announces Tesla will leave Delaware
February 2024: Tesla Reincorporates in Texas
-
Musk moves Tesla incorporation from Delaware to Texas
-
First major company in the "Dexit" exodus
-
Musk publicly criticizes Delaware's business climate
February-November 2024: The Corporate Exodus Accelerates
-
SpaceX: Moves to Nevada
-
Dropbox: Leaves Delaware
-
The Trade Desk: Reincorporates elsewhere
-
Trump Media: Exits Delaware
-
Dozens of others follow the exodus
-
Texas captures 40% of all "Dexit" reincorporations
June 2024: Delaware Scrambles with Senate Bill 21
-
Most comprehensive corporate code overhaul in half a century
-
Designed to stop the Musk-triggered exodus
-
Attempts to restore business confidence in Delaware corporate law
-
Goal: Signal that Delaware courts remain reliable and business-friendly
November 5, 2024: Matt Meyer Elected Governor
-
Defeats Republican Mike Ramone
-
Takes office January 2025
-
Inherits: $980 million in reserves, corporate exodus concerns, pending federal tax changes
2025: MEYER BREAKS 68 YEARS OF TAX POLICY
October 20, 2025: DEFAC Delivers the Verdict
-
Delaware Economic & Financial Advisory Council (DEFAC) meeting
-
Projects $410 million revenue impact over three years from federal OBBBA:
-
FY 2026: $223 million
-
FY 2027: $107 million
-
FY 2028: $80 million
-
-
Total: $410 million timing shock (NOT a permanent loss)
-
Meyer's Response: Calls extraordinary legislative session instead of exploring fiscal discipline
Note: Delaware had $980 million in reserves. The $410M represented 6% of the $6.8B budget.
Late October 2025: Business Community Sounds the Alarm
Joint Opposition Letter:
-
Delaware State Chamber of Commerce
-
Delaware Business Roundtable
-
Delaware BioScience Association
Key Warning: "The steepest impacts of this change would be borne by small and startup science and technology businesses whose existence and immediate growth potential depends upon receiving the immediate benefit of R&D expensing."
Brian DiSabatino (Business Roundtable President):
"Even if the dollar amount is not massive, it's the perception out there that we're different. When people are making entrepreneurial choices, that perception may be all we have when the next Merck is trying to figure out where to locate."
Meyer's Response: Dismissed concerns, characterized opposition as defending "large, out-of-state businesses"
November 7, 2025: Meyer Blames Republicans
-
Press conference statement: Revenue loss "100% linked to Republican tax cuts for the wealthy"
-
Ignores that 49 other states maintained federal conformity
-
Frames HB 255 as protecting "working families" from "federal tax changes
November 13, 2025: House Passes HB 255
-
Vote: Bare minimum needed (26 votes in 41-seat chamber)
-
Democrats hold 27 seats—needed virtually all present
-
Virtual voting used to secure majority
-
Nearly 2 hours of Republican opposition
-
Business community warnings ignored
-
Result: Delaware decouples from federal R&D expensing provisions
November 19, 2025: Senate Passes HB 255
-
Senate approves decoupling legislation
-
Meyer signs HB 255 into law immediately
Meyer's Official Statement:
"This is a perfect example of the government working together swiftly to make sure hard-working Delawareans are protected, and families don't bear the costs of unanticipated federal tax changes intended to benefit large, out-of-state businesses."
What HB 255 Actually Does:
-
Forces businesses to spread R&D deductions over 5 years (instead of immediate)
-
Forces equipment/property deductions over 5+ years (instead of immediate)
-
Creates dual compliance burden (different rules for state vs. federal)
-
Sunsets in 2030 (creating future policy uncertainty)
-
Breaks 68 consecutive years of federal tax conformity
December 2025: THE DAMAGE IS QUANTIFIED
December 15, 2025: DEFAC Meeting Confirms the Real Numbers
Brian Maxwell (OMB Director) reports HB 255:
-
"Saved" $328 million through FY 2028
-
Actually: Will extract $365 million from businesses by forcing deferred deductions
Updated Projections:
-
FY 2026: $222.8 million extracted from businesses
-
FY 2027: $107.4 million extracted from businesses
-
FY 2028: $79.9 million extracted from businesses
-
Total: $410.1 million over three years
But Delaware didn't "save" anything—the state simply:
-
Changed WHEN businesses can deduct legitimate investments
-
Created dual compliance costs
-
Added policy uncertainty (expires 2030)
-
Delayed money businesses need for growth, hiring, expansion
Real Cost to Businesses:
-
Time Value of Money Loss: For a company with $100M annual R&D: $1.88 million NPV loss annually
-
Dual federal/state compliance costs
-
Uncertainty about post-2030 rules
-
Competitive disadvantage vs. 49 other states
December 15, 2025: Tax Foundation Rankings Released
-
Delaware ranked 50th out of 50 states in corporate tax climate
-
Dead last in the nation
-
Previous ranking: 24th overall
-
Result of HB 255: "Decoupling would make Delaware's tax code less friendly toward investment"
December 19, 2025: Delaware Supreme Court Reverses Musk Ruling
Just 4 Days After DEFAC Meeting:
-
Supreme Court overturns Chancellor McCormick's January 2024 decision
-
Reinstates Musk's $56 billion compensation package
-
Rules that rescission was "inequitable" remedy
-
Awards nominal damages ($1) instead
Supreme Court's Key Finding:
"Rescission is inequitable here primarily because all parties must be restored to the status quo ante and total rescission leaves Musk uncompensated for his time and efforts over a period of six years."
Further Finding:
"It is undisputed that Musk fully performed under the 2018 Grant, and Tesla and its stockholders were rewarded for his work."
Institutional Conflict:
-
Delaware Supreme Court: Acknowledges error, reverses course, restores compensation
-
Governor Meyer (same week): Ignores warnings, breaks 68 years conformity, denies any mistake
But It's Too Late:
-
Tesla already reincorporated in Texas
-
SpaceX already moved to Nevada
-
Dozens of companies already fled
-
Texas already captured 40% of "Dexit" reincorporations
-
Delaware already ranked 50th in corporate tax climate
The Message to Corporate America:
"Delaware's courts tried to fix their mistake. Delaware's Governor made his worse."
December 21, 2025: Truthline Report Published [Updated January 19, 2026]
-
Comprehensive analysis of HB 255's impact
-
Documents Meyer's pattern of choosing political expedience over fiscal discipline
-
Written by former County Council President Karen Hartley-Nagle (served alongside Meyer 2016-2024)
-
Establishes 8-year pattern of similar decision-making
THE DAMAGE: WHAT DELAWARE LOST
Immediate Economic Impact
-
50th out of 50 states in corporate tax climate
-
$365 million extracted from businesses (delayed deductions)
-
$1.88 million annual NPV loss per company with $100M R&D
-
Dual compliance costs for every business
-
Policy uncertainty through 2030
Competitive Disadvantage
-
49 states maintained federal conformity
-
Delaware broke 68 consecutive years of policy stability
-
Businesses now compare Delaware to:
-
North Carolina: Maintained conformity
-
Texas: Maintained conformity, captured 40% of Dexit
-
Nevada: Maintained conformity, attracted SpaceX
-
Reputation Damage
-
Supreme Court tried to restore judicial credibility (Dec 19)
-
Meyer destroyed tax policy credibility (Dec 15)
-
Businesses now see: "Delaware will change rules when politically convenient"
-
Tagline: "From business capital to 50th out of 50"
Long-Term Questions (2026-2030)
-
Will businesses that stayed begin to leave?
-
Will expansions go elsewhere?
-
Will the "next Merck" choose another state?
-
What happens when HB 255 expires in 2030?
-
Will Delaware's ranking fall even further?
KEY DECISION POINTS: THE PATH NOT TAKEN
What Meyer COULD Have Done (October 20, 2025)
Alternative #1: Use Reserves
-
Delaware had $980 million in reserves
-
Could have covered $410M timing shock
-
Would have maintained tax competitiveness
-
Would have avoided 50th-place ranking
Alternative #2: Freeze Spending
-
FY25 budget included $18.7 million for new government positions
-
Freeze for one year = covers 4.6% of "crisis"
-
Spending grew 35.5% over 4 years ($780M above 4% baseline)
-
If spending had grown at 4%: No crisis at all
Alternative #3: Maintain Conformity
-
49 other states chose this path
-
Preserves policy stability
-
Avoids dual compliance costs
-
Maintains competitive advantage
-
Keeps Delaware's reputation intact
What Meyer Actually Chose:
-
Break 68 years of tax conformity
-
Extract $365M from businesses
-
Create policy uncertainty through 2030
-
Make Delaware 50th out of 50 states
-
Ignore business community warnings
-
Blame "Republican tax cuts" despite 49 states maintaining conformity
LOOKING AHEAD: CRITICAL DATES
2026-2028: The Impact Years
-
Businesses calculate NPV losses from delayed deductions
-
Companies decide: Stay in Delaware or follow Tesla?
-
Rankings updated: Will Delaware fall further?
-
Expansions planned: Where will they locate?
December 2027: DEFAC Report Required
-
HB 255 mandates DEFAC report on:
-
Revenue impact analysis
-
Federal law updates
-
Recommendations for future tax policy
-
-
Will document actual vs. projected effects
2028: Delaware Voters Decide
-
Gubernatorial election
-
Meyer's HB 255 record on the ballot
-
Question: Was breaking 68 years of conformity worth it?
2030: HB 255 Expires
-
Delaware tax code reverts to federal conformity (unless legislature acts)
-
Creates additional policy uncertainty
-
Businesses must plan without knowing post-2030 rules
THE VERDICT
What Meyer Claims:
-
"Saved $328 million"
-
"Protected working families"
-
"Swift action in crisis"
What Actually Happened:
-
Extracted $365 million from businesses
-
Made Delaware 50th out of 50 states
-
Broke 68 years of tax policy stability
-
Created uncertainty through 2030
-
Ignored business community warnings
-
Had alternatives (reserves, spending freeze)
-
Chose political expedience over fiscal discipline
The Pattern (Witnessed by Former County Council President):
When faced with hard budget choices, Meyer consistently chooses:
-
Extract revenue over control spending
-
Political expedience over long-term responsibility
-
Dismissing business concerns as "special interests"
-
Blaming external factors (Republicans, federal policy)
This isn't one mistake. This is how he governs.
SOURCES & CITATIONS
Primary Sources:
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Delaware Economic & Financial Advisory Council (DEFAC) meeting minutes: October 20, 2025 & December 15, 2025
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House Bill 255 legislative text (signed November 19, 2025)
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Delaware Supreme Court opinion: Tornetta v. Musk, December 21, 2025
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Tax Foundation 2026 State Tax Competitiveness Index
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Governor Meyer official press release, November 19, 2025
Business Community:
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Joint letter: Delaware State Chamber of Commerce, Delaware Business Roundtable, Delaware BioScience Association
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Brian DiSabatino interviews (Delaware Business Times, November 2025)
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Business testimony on HB 255
Federal Policy:
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One Big Beautiful Bill Act (OBBBA), signed July 2024
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Federal tax code Section 174 (R&D expensing)
FOR MORE INFORMATION
Full Analysis: Truthline Report - "Delaware's $410 Million Mistake: How Governor Meyer Chose Politics Over Delaware's Economic Future"
Author: Karen Hartley-Nagle, Former New Castle County Council President (2016-2024)
Website: www.karenhartleynagle.com
December 21, 2025 [Updated: January 21, 2026]
"The Signature That Made Delaware the Worst State in America to Run a Corporation"
Governor Matt Meyer signs House Bill 255, decoupling Delaware from 68 years of federal tax conformity.
Delaware business groups warned him this would drive companies away. He signed it anyway.