The rule of thumb in Wyoming is that about 70 percent of the state’s income is derived from minerals. That money flows from severance taxes on crude oil, royalties from coal and financial returns from investments and property taxes, not to mention the sales and use taxes that come along with good times in the oil patch.
But, the rule of thumb just isn’t true.
Wyoming hasn’t edged near a 70 percent reliance on minerals in more than 10 years.
In 2017, about 52 percent of revenue came from minerals — that’s $2.2 billion of $4.2 billion in revenue, according to a report from the Wyoming Taxpayers Association, an organization that advocates for fair, efficient and transparent tax policies.
A report provided to the Joint Revenue Committee recently placed that percentage higher, at about 62 percent.
Wyoming did reach the 70 percent threshold before, said Buck McVeigh, executive director of the Wyoming Taxpayers Association.
“But, that’s back when natural gas was in its heyday,” he said. “We had coal revenues that were steady. The last two years have been particularly brutal on our mineral income.”
McVeigh said the numbers didn’t surprise him. He’s been tracking the contribution that minerals make to Wyoming’s economy for years, formerly working for the state’s Economic Analysis Division. For more than a decade, he was among the group of economists that predict state revenue each year, forecasts that lawmakers use to craft Wyoming’s two-year budget.
Though the 70 percent assumption was once true, it has never been a dependable figure.
“I think people remember the good years,” state economist Jim Robinson said.
In 2008, minerals revenue approached 70 percent, representing 66 percent of revenue. 2011 and 2013 were similar. But the mid to high 60s are the norm over the last decade.
“People like to hear it, and they run with it,” said McVeigh of the 70 percent figure. “They don’t track the revenue. They have absolutely no idea what the mineral contribution is.”
The Taxpayers Association’s report also breaks down other trivia-type facts about Wyoming, like how little the average taxpayer in Wyoming contributes, compared to what they receive in government services.
People pay their property taxes and vehicle registration fees and buy gasoline and groceries. But the state, funded largely by minerals, pays for everything else in their community from schools to road repair and law enforcement.
The gap between what people contribute and what they get in return is broad, McVeigh said.
A three-person household making about $60,000 a year with a $200,000 home pays about $3,070 in personal taxes per year, compared to costing the state $27,600 in public services, according to the report.
The disparity is a result of two things, according to the association. The Wyoming tax structure relies on charging the drilling and mining companies, and there just aren’t that many people spread across a large geographic area.
Wyomingites are getting a bargain, McVeigh said. But it only works when the fossil fuel industries are doing well.
For Robinson, the state economist, the interesting thing about last year’s numbers as displayed in this report is that they look like a better proportioned economy, the kind of Wyoming that everyone keeps talking about and the end goal of Gov. Matt Mead’s outgoing economic growth initiative, Endow.
“If anything (the report) gives you a look at what a more diversified economy would look like,” Robinson said of the proportions.
Gov.-elect Mark Gordon, who will take Mead’s seat in early January, has said he doesn’t support raising taxes at this time. In an interview earlier this month, Gordon said there were options like reining in the budget and raising revenue that come first.
“Gordon has consistently said that it is time for the state of Wyoming to have a real conversation about how we build a sustainable tax structure for the future,” Gordon’s spokeswoman, Kristin Walker, wrote in an email Thursday. “This report reinforces the need for this important dialogue, particularly as we work to strategically grow and diversify our economy.”
But the fact is Wyoming can’t actually get to a diversified economy, despite growing business and drawing new residents, without changing one fundamental thing, the group notes in its report: tax structure.
If 100 workers were added to every job category except oil and gas, the state’s expenses would run ahead of its revenue in a few years, the report states, relying on a recent study presented to Wyoming lawmakers.
Broadly expanding population and business in Wyoming, while still relying on boom- and bust-sensitive mineral companies to foot the bill could bankrupt the state, McVeigh said. He calls it the economic development paradox. And it’s not new.
“It’s been carefully and eloquently described by university professors for many, many decades,” he said. “Yet, I think the perception by many is that this is a newfound discovery.”
People simply do not want to pay taxes. They see their tax burden as too great already, and when people like McVeigh argue that the system is precarious, some write it off as propaganda, he said.
“That’s the last thing on my agenda,” McVeigh said. “There’s really just no appetite for paying taxes. We’ve gotten kind of spoiled from living off our mineral revenue.”