Without a solution to the inherent problems with Wyoming’s tax structure, the state may lurch from one budget crisis to another.
Revenue projections for the future from minerals indicate little or no growth at the same time the state’s faulty tax structure limits economic growth.
Those glum conclusions are from the final report of the Tax Reform 2000 Committee.
Shelved for years until the latest recession, the report is prophetic and amazingly timely.
The structural flaw referenced often in the report is the state’s reliance on sales taxes, property taxes and mineral taxes for most of its income.
The committee members made a darned good case for a state income tax, personal and corporate, even while conceding it was the most controversial recommendation in its report.
Wyoming voters in 1974 amended the Wyoming Constitution to provide that no tax can be imposed on income without allowing full credit against such tax liability for all sales, use and ad valorem taxes paid in the same taxable year.
The author of the amendment in the 1973 Legislature, former House Speaker Nels Smith of Crook County, described the amendment as “preventive medicine” in a telephone interview recently.
Without the protections of the constitutional amendment an income tax would only compound the existing inequities in the state’s tax system.
As an example, he said, the property owners pay for a school bond issue but not the non-property owners.
If an income tax ever were to be passed, Smith said, it would be “a desperation move” triggered by a real crisis.
It also would be political suicide for any legislators who supported the income tax.
Smith said he did not agree with the tax reform committee’s recommendation.
Legislators who have looked at the income tax say the constitutional restraint makes a tax essentially not worth the trouble, given the cost of setting up an agency to administer it.
The tax reform report estimated a state income tax could produce $50 to $150 million per year in 1999 dollars, depending upon the rates.
The credits for state taxes paid would be entered as deductions on a resident’s federal income tax return.
Under that simplified system, the cost of administering the tax would about $4 million a year, the report said.
The income tax, the report said, could also equalize the tax burden among income groups.
Under the current structure of excise and property taxes, lower-income families pay a greater percent of their income than those in the higher income brackets.
If the tax were rolled into the mix along with sales use and property taxes, the tax burden could be proportionately the same across all income levels.
Phillip Noble, a retired Cheyenne businessman and state agency director, was vice chairman of the committee.
The group met for two days every month for a year and a half and traveled to every hamlet in the state for hearings.
He commended the legislators on the committee in particular for their courage in recommending the tax in the face of so much opposition.
One of the downsides was that the governor who appointed the committee, Jim Geringer, slammed the group afterward for the income tax recommendation, Noble said.
“The only option in Wyoming for longtime growth is an income tax — corporate and personal,” Noble said last week in a phone interview. ”Otherwise we’re not going to have enough money for services — ever.”
The reason Wyoming will never prosper without an income tax is because the state is too small to attract major businesses, he added.
A new report from Bloomberg News takes the same tack.
Wyoming’s economy is lagging behind the nation and the Rocky Mountain region because it is built around the stumbling energy business.
Another reason is the state’s small population and absence of any large metropolitan areas. And economic growth, the Bloomberg article said, has become more and more concentrated in large metropolitan areas.
Yet “metro Cheyenne” is getting close, Bloomberg says, with an estimated 97,121 residents as of July 2015.
It’s pretty clear that Wyoming will not have a state income tax, individual or corporate in the near future or as long as any other revenue options are open.
Other non-income-tax states, meanwhile, have alternates. Texas has a hefty corporate franchise tax; Nevada has gambling.
It’s all in the report.