Lawmakers are considering increasing Wyoming’s reliance on property taxes until the energy industry recovers. A bill considered by the Interim Joint Revenue Committee last week would raise the taxable value of residential and commercial property taxes by 2 percent for five years or until tax collections from minerals recover to pre-bust levels, whichever is first.
The increases could would generate about $284 million over the coming two-year budget cycle, moving the state closer to closing its nearly $800 million budget shortfall.
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Wyoming received about two-thirds of public revenue from taxes paid by the energy industry, especially through severance taxes and mineral royalty payments. Since prices for oil, natural gas and coal began declining in 2015, the state has lost a significant amount of revenue.
The property tax bill, considered in Cheyenne last Tuesday, is meant to raise rates only until payments from energy companies increase. The increases would be rescinded in 2024 or once the assessed valuation of mineral production in the state reaches $12.5 billion. This year the value is roughly $8.9 billion.
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Rep. JoAnn Dayton, R-Rock Springs, expressed concern that while the tax was meant to raise revenue from individuals and businesses in the state while the mineral industry recovered, higher property taxes could impose a burden on energy companies, too.
“Those companies that are mineral companies that also have processing — trona and processed soda ash — they are impacted,” she said.
Wyoming Department of Revenue Property Tax Division Administrator Brenda Arnold clarified that while energy companies were not specifically targeted in the property tax increase bill, any commercial equipment they owned would be subject to the higher rates.
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Wyoming has the sixth-lowest effective property tax rates in the nation, according to the Tax Foundation.
In Wyoming, a mill levy — one mill is $1 per $1,000 of value — that is used to tax property is currently assessed on just 9.5 percent of the value of residential property and 11.5 percent of commercial property. That means on a piece of property worth $100,000, the mill levy is applied to just $9,500.
The proposal considered last week would raise the percentage of a property’s value that would be taxed to 11.5 percent for residential property and 13.5 percent for commercial property.
If the full 2 percent increase was implemented immediately it would generate about $142 million per year, with $88 million of that going to education and $52.8 million going to other government entities.
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Committee members also requested that the Legislative Service Office draft a bill that would phase in the increase, starting with 1 percent in July and another 1 percent increase in 2019. That would raise about $71 million less over the five-year life of the tax increase, according to the Legislative Service Office.
The revenue committee has been tasked by the Legislature’s leadership with generating proposals to increase public funds ahead of the budget session in February.
While the property tax bill was forwarded for further consideration at the committee’s December meeting, there is little indication that lawmakers on the committee will actually vote to sponsor the measure and recommend it to the full Legislature.
In addition to raising revenue for schools and the state’s general fund, the property tax increase would recalculate the current formula used to distribute property tax in order to cover a currently-unfunded reimbursement program. Committee co-chair Rep. Mike Madden, R-Buffalo, said that property owners who fall in the bottom-quarter of average household income are currently eligible to receive a rebate on half the property tax they pay. However, there is no funding source for the rebate right now, meaning that the program effectively does not exist.
The bill would allocate 0.7 percent of property tax collections to the rebate program.
Madden did not defend the premise of the low-income property tax rebate, but said that so long as the state had such a law on the books it was important to fund it.
“That is just the cost of doing that kind of thing,” he said.
The property tax increase is just one of a host of measures that the committee has considered in order to fulfill its mandate to generate proposals for raising $100 million, $200 million and $300 million that can be passed along to the full Legislature.
Other bills drafted for the committee include a tax on leisure and hospitality services meant to fund tourism promotion and the diversion of money from several state investment accounts to pay for government operations.
The committee will decide which bills to sponsor at its meeting in early December.
Correction: This article has been updated to clarify in all references that the 2 percent increase would apply to the taxable value of residential and commercial property in Wyoming.