CHEYENNE —The Joint Interim Revenue committee members fulfilled their top interim assignment recently.
They passed a bill to broaden the tax base by expanding the services subject to the state sales tax by repealing their exemptions.
This includes repealing the sales tax exemption on groceries, which could be expected to be the touchy crux of the debate over the bill.
The sweetener in the bill is a half-cent reduction in the state sales tax to 3.5 percent.
This would make the bill revenue-neutral, as the legislator leaders who assigned the study suggested.
The Legislature periodically has tried to repeal those 50 or so exemptions that crept into state statutes over the years.
But the businesses that enjoyed the tax exemptions fought off all attempts at repeal.
In fact, one revenue committee years ago tackled the exemptions, drew a large crowd of lots of special interest groups to their meetings and ended up adding a new exemption.
Then there was the session more than a decade ago when a Casper legislator, Rep. Bob Tanner, all by himself tried to remove some of the exemptions, one bill at a time.
One by one, they failed.
At a recent meeting in Cheyenne, Sen. Mike Madden of Buffalo, the co-chairman of the Joint Revenue Committee pushed the members to pass the neutral tax exemption reform bill saying they were obligated to fulfill their assigned task of finding new revenue.
Everybody, he said, should like the bill because it lowers the state sales tax rate.
The bill is like the ones that have come before the committee before except, besides reducing the tax rate, it excludes legal and banking services.
A spokesman for the Wyoming Farm Bureau, Brett Moline, told the committee his group likes the lower tax rate but were not crazy about removing the exemption because it wasn’t clear whether the farm bureau members would be better off.
The Bureau also does not support removing the exemption on groceries which could be a hardship for low income people.
“We know we’re going to bust as we always do,” he said, referring to Wyoming’s roller coaster economy.
After hearing more testimony, Sen. Ray Peterson of Cowley, the committee co-chair, said, “We’re throwing it all out there,” for the full Legislature to decide.
Rep. Cathy Connolly of Laramie said she couldn’t vote for the bill because it would be hard for her to explain to her constituents that she supported removing the tax exemption on food.
“I don’t think we’ve done enough homework on the exemptions,” Connolly said.
Her amendment to pull groceries out of the repealer failed.
Madden said last week in an interview he thinks the reform bill might pass the Legislature next year because, unlike previous proposals, it is constructed to be revenue-neutral.
He also said he was glad to see that groceries are still on the repeal list so the measure will start out as a pure bill.
Both Madden, a retired economics professor, and Peterson, a businessman, are leaving the Legislature.
Madden is also known for his expertise on the gas tax. He explained how the market works in a lecture, dubbed gas tax 101, that he gave to legislators. His prediction that the users would not see the tax in the price at the pump was borne out over time.
He said last week in a telephone interview that many of the sales tax exemptions are just a giveaway, like the tax exemption on manufacturing equipment, and have immense implications for the state.
He would like to see Wyoming have a tax policy more like South Dakota’s.
That state does not offer all the free giveaway programs that Wyoming does, yet still is growing.
“To me, that’s a lesson to be learned,” he said.
Author’s note: The affiliation for Steven Horwitz, who was quoted in last week’s column on the persistent gender wage gap is a distinguished professor of enterprise at Ball State University in Muncie, Ind. He wrote the article about myths on both sides of the debate on the wage gap, for the online Foundation of Economic Education.