BUFFALO — Right now, the only sales tax on that steak you ordered will appear on your receipt. The rancher didn’t pay a tax when she bought the calf to raise, the slaughterhouse didn’t pay a tax when it bought the cow and the restaurant didn’t pay a tax when it bought the meat.
But there’s another type of tax, called a gross receipts tax, that does charge businesses for each of those transactions.
It’s controversial for various reasons. But the merits didn’t much matter to the Interim Joint Revenue Committee during its meeting here last week.
Because the revenue committee wasn’t considering a gross receipts tax. Not really, anyway. Casper accountant and freshman GOP state representative Jerry Obermueller just wanted a tally of the total gross sales of Wyoming companies. The data lets economists know how much business is being done by out-of-state companies that don’t currently contribute to the Legislature’s general fund.
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“There’s more to this than a tax component. There’s also an economic analysis element,” Obermueller said. “I was surprised you couldn’t find out how much economy was imported into Wyoming.”
Obermueller’s quest to pass a bill to collect this data from corporations in the state is notable for dancing closer to major tax reform than Republican lawmakers have been willing to in recent years.
While debate over a gross receipts tax might seem wonky, it may be an indication of how likely it is that the Wyoming Legislature would seriously overhaul the state’s tax code as revenue from the energy industry plummets.
Without a personal or corporate income tax and with some of the lowest sales and property taxes in the nation, Wyoming is heavily reliant on the mercurial energy industry. Severance taxes, mineral royalties and other levies paid by mining companies contribute 60 to 70 percent of public funds in the Cowboy State each year.
The drop in coal, natural gas and oil prices in recent years has led to a nearly $800 million deficit in education funding for the upcoming two-year budget cycle and renewed a discussion about raising revenue, perhaps through new taxes. But most proposals by Republicans, who control the Legislature, have focused on tinkering with existing fees. Yet even those modest attempts to raise, say, sin taxes, like those on alcohol and cigarettes, have failed.
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While the House of Representatives was receptive to some of these small tax increases during the legislative session last winter, most of those measures failed in the Senate, where President Eli Bebout, R-Riverton, has made clear his opposition to raising almost any new revenue before passing major cuts to various state programs.
“You’ve seen what happens to taxes when they hit the Senate,” Sen. Dave Kinskey, R-Sheridan, said. “They hit a buzzsaw of opposition.”
Kinskey hastened to add that he was proud to be part of that buzzsaw.
While a few vehicle-related fees were passed by the Legislature last year, more ambitious bills failed. Those included one proposed by Senate Minority Leader Chris Rothfuss, D-Laramie, that would have launched a new committee to explore the entire tax code in a similar manner to the Tax Reform 2000 report.
And, if Wednesday’s discussion was any indication, proposals like Obermueller’s appear ripe to be shredded by an increasingly conservative Senate.
The committee eventually agreed to move forward with requesting the secretary of state’s office begin collecting gross sales data from corporations filing annual reports in Wyoming, but not without opposition from two senators: Kinskey and Affie Ellis, R-Cheyenne.
The revenue committee is more moderate than the full Legislature, and the opposition of two senators bodes ill for the measure’s fate when considered by the full chamber.
That Kinskey and Ellis, as well as Rep. Timothy Hallinan, R-Gillette, opposed the bill was especially notable given that collection of the gross sales information, which would be a precursor to any attempt to pass a gross receipts tax, would not be available until 2021 or 2022 at the earliest, according to the secretary of state’s office. The effective date for the bill is July 2019, and several years would be needed to ensure that lapsed and subsequently renewed corporate entities would be counted in the data.
But Kinskey nonetheless saw the bill as both an unreasonable government intrusion into private business as well as a precursor to new taxes. He said that as Sheridan mayor he rejected a request from his staff to begin requiring business licenses in order to collect better economic information about the city.
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“I kind of like living in a state where government doesn’t have all that information,” he said. “It’s really the intent of this to put us on a slippery slope to a gross receipts tax.”
Ellis said that she was wary of the state requiring businesses to disclose their gross sales for purely inquisitive purposes.
“We don’t have authority to ask and demand information,” she said.
Businesses are already required to submit nearly identical information on federal tax returns.
Obermueller said in an interview later that the bill is in line with other interrogatory exercises the Legislature is undertaking in light of the current funding crisis, such as examining the school funding structure and looking for inefficiencies in state government.
“We’re going through a period of learning more,” Obermueller said. “I consider my bill part of that effort.”
He remained optimistic that his bill had a good chance of passing the Legislature because all it did was provide more information to work with.
“I think most people would probably believe that the people of Wyoming deserve to know what our economy looks like and would not be interested in sheltering them from that knowledge,” he said.
But despite most members of the revenue committee voting in favor of the bill last week, Kinskey and Ellis also sit on the five-member Senate revenue committee, which controls which bills make it to the Senate floor. A third member, Jeff Wasserburger, R-Gillette, missed the Buffalo meeting but has opposed exploring tax options in the past.
Other lawmakers on the committee supported the bill, but in at least one case the reasoning was rather quixotic and may not translate to support for exploring new taxation on Wyoming businesses.
Rep. Dan Furphy, R-Laramie, said he was mostly interested in collecting data on sales from out-of-state companies doing business in Wyoming and finding a way to tax them.
“I want to make in-state companies more competitive, and I’d like to see how we could somehow gather information on the out-of-state companies,” he said. “If we’re going to proceed on a gross receipts tax, those are the companies I’d like to see taxed.”
Any tax explicitly targeting out-of-state companies would likely run afoul of the U.S. Constitution’s interstate commerce provisions.
As a rule, experts say that state legislatures are far more likely to raise or expand existing taxes before looking to new forms of taxation.
Western Washington University professor Todd Donovan said in an interview earlier this year that the politics of expanding existing taxes are far easier to manage, even in conservative states.
“If you go from zero to anything, then people really notice that,” he said. “If it’s an existing tax, it’s already there.”
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GOP operative and Johnson County Commissioner Bill Novotny, who attended the revenue committee meeting, said that serious tax increases were unlikely during the upcoming session.
“The mindset appears to be that cuts alone can close the budget deficit,” he said.
If taxes are raised, Novotny said it is likely they will pursue a slight expansion of sales tax — “nibbling away at the edges,” he wrote in an email.
“Income tax and gross receipts tax are DOA,” Novotny said.