A legislative committee narrowly advanced a measure on Friday to repeal sales tax on electricity in the midst of rising electrical rates — a $43.4 million annual savings for ratepayers, according to the bill’s fiscal note.
But there’s a huge downside to Senate File 128, “Repeal of sales tax on electricity,” according to critics and even some supporters of the concept.
By far, Wyoming’s largest electrical consumers are industrial users: mines, oil and natural gas producers and refiners, and especially a booming data center industry in Laramie County. Many towns and counties rely on sales taxes from those industries — including from electricity — to support public services, including services those very industries necessitate.
For example, Evansville Police Chief Mike Thompson described the revenue base of his 2,700 person community as more industrial than residential. The Casper-adjacent town, home to an oil refinery and a multitude of other large industrial operations, is almost completely reliant on various sales taxes to support public services.
“It’s going to cripple our community,” Thompson said.
Likewise, Cheyenne has seen wild success in courting manufacturing and data facilities — enterprises whose primary net contribution to the city and county are taxes, Cheyenne Mayor Patrick Collins testified before the Senate Revenue Committee.
“I see data centers as our Jonah field,” Collins said, referencing Sublette County’s famed oil and gas development. “I see them as our Campbell County coal mines. We don’t have great mineral wealth here in Laramie County to fuel our economy, as many parts of our state do.”
Demand for electricity in and around Cheyenne is projected to increase from about 350 megawatts today to 1,200 megawatts by 2030, based on anticipated growth in manufacturing and data centers, according to Collins. “So in today’s dollars, that would cost Cheyenne about $4.4 million if we take the sales tax off electricity,” he said.
Those concerns were echoed by the Wyoming Association of Municipalities and Wyoming County Commissioners Association. They noted that proposed tax reductions for homeowners, as well as a wide range of pending tax reductions for extractive industries, will likely starve small governments of the revenue they need.
All of those anxieties might be assuaged, however, according to the bill’s proponents, including lead sponsor Republican Sen. Troy McKeown from Gillette. Lawmakers are working to partially negate the revenue loss from property tax relief for towns and counties McKeown said. Plus, according to Sen. Cale Case, R-Lander, there are plans in the works to offset local governments’ losses from SF 128 with a new tax that taps electric utilities and their customers outside Wyoming.
“It’s going to cripple our community.”
Mike Thompson, Evansville Police Chief
“We would export a very large amount of tax burden and we would collect more than the sales tax we’re giving up,” Case said.
Lawmakers discussed such a strategy in April, noting Wyoming is particularly suited to shift the tax burden because it exports more electricity than it uses — although the volume of that export of electrons has been declining in recent years, according to Power Company of Wyoming Director of Communications and Government Relations Kara Choquette, who testified before the committee and participated in interim deliberations on the topic.
Nonetheless, a bill to implement a new tax to offset the revenue loss of SF 128 had yet to materialize by Friday afternoon.
“There’s a bill to be filed in the House that accomplishes — kind of looks at these things so they have to all fit together,” Case said. “It’s complicated.”
Underpinning that potential bill is a report by a legislative “electric tax subcommittee,” which was appropriated $50,000 to hire a law firm to analyse the legality of imposing taxes that extend beyond Wyoming’s borders. The Senate Corporations, Elections and Political Subdivisions Committee, chaired by Case, met behind closed doors with the hired lawyers at the Capitol on Thursday to hear their analysis.
“The purpose of the briefing yesterday was to hear from our lawyers that we hired,” Case told the Revenue Committee on Friday. “So it was privileged lawyer communications.”
Based on that briefing, “It’s clear that we can do that,” Case added. “We absolutely can do that.”
Whether or not such a bill materializes in time to offset revenue losses from SF 128, a bevy of lobbyists, who regularly comment on legislation, said they emphatically support the bill, including those representing Wyoming rural electric co-ops, Wyoming agricultural industries, the Petroleum Association of Wyoming and Wyoming Mining Association. Monthly electricity bills are one of the top expenses for doing business, they testified.
“We have a far larger industrial load in Wyoming than you do residential — that’s not true for most states,” Jody Levin told lawmakers on behalf of the trona industry and the Wyoming Mining Association. “So the increases that we have seen in electricity have been borne largely by your industrial consumers.”
McKeown tested Evansville Police Chief Thompson’s claims regarding the potential impact to his community, and bristled at his pleas for more careful scrutiny of the measure. “It’s actually pretty simple. It just takes the sales [tax] off electricity,” McKeown murmured to a fellow committee member before asking for a vote.
The measure advanced with a 3-2 vote.
Very interesting article Dustin. Conceptually, there are some very important factors which would be worthy exploring. They are:
1.) Is it true that we export 90% of the electricity generated in Wyoming from all sources – coal fired power plants, natural gas, solar and wind. If so, how do we pay for the infrastructure required to support these industries??
2.) I’m aware of severance and ad valor-em taxes being levied on coal as mineral production, and royalties being collected on state and federal coal leases so there is a source of revenue to support Wyoming infrastructure. Since solar and wind are obviously not mineral related energy, what taxes are levied on those industries – they certainly pay property taxes based on industrial categorization of their real property but there can’t be royalties levied against the sun’s rays and the wind.
3.) Are the relatively new energy producing industries currently taxed less than the mineral, oil and gas related energy producing industries??
4.) Ultimately, the consumers must pay for the taxes imposed on their energy consumption, and if that energy is sourced to Wyoming, sales taxes of electricity may be appropriate in order to finance Wyoming infrastructure.
5.) The federal government itself collects something like 17 1/2 % royalty on coal mined on federal mineral estate and collects similar royalties on oil and gas produced from federal mineral rights ‘ how much is Wyoming collecting from State of Wyoming mineral rights which would include uranium, bentonite, trona, etc,
6.) Currently, we are exporting many of our taxes to the out of state consumers so the concept of requiring those consumers to help fund infrastructure in Wyoming is well founded – should electricity likewise carry an equal burden.
Lots of things to consider, I hope the legislature gets it right.
It is amazing how this legislature can continue to reduce taxes at every turn while explaining they can “backfill” lost property tax revenue or charge someone else with a new tax that taxes electric utilities and their customers outside of Wyoming so that the tax bases that Wyoming’s small towns use to provide essential services will not be affected by their largess. I trust the current system because it has worked for a long time. I do not trust the legislature to provide backfill or pursue any type of out of state taxation for any longer than it suits their political ambitions.
I have said it before and will say it again. WyoFile should do the homework and provide a balanced view with some simple research.
Mayor Patrick Collins testified before the Senate Revenue Committee. “We don’t have great mineral wealth here in Laramie County to fuel our economy, as many parts of our state do.”
To say Laramie County does not have mineral wealth that other counties have might be true, but Laramie County is still a very wealthy county in Wyoming. A simple review of statewide financial statements of counties shows that Laramie County ranks #3 in statewide county revenue in FY 2023.
#1 Campbell County Revenue $131,735,081
#2 Teton County Revenue $112,850,343
#3 LARAMIE COUNTY $108,561,401
Clearly, the top three counties have differing sources of tax revenue. Campbell does have mineral wealth; Teton has tourism wealth and Laramie County has governmental wealth as the “seat of power” with the Capitol located in Cheyenne.
Even worse, Patrick Collins warns of a $4.4 million dollar loss (in current dollars) with the proposed bill. Testimony like this is a BIG lie of omission. What does a loss of $4.4 million mean to Cheyenne?
Cheyenne has more revenue than any other city in Wyoming by a large margin. Annual reports of cities show that in FY 2023, Cheyenne had $127,270,200 of revenue. The next closest city was Casper with a mere $83 million in revenue. The newly released FY 2024 Annual report from Cheyenne reports revenue increased to $141,546,417 or an increase of more than $14 million. Additionally, Governmental Funds increased over $15 million to Over $156 million.
If Cheyenne were to take a $4.4 million loss in revenue today it would not hurt county services at all. It would simply lower the rate of savings that the county uses to build it’s own rainy day fund.
Make no bones about it, Cheyenne is a very, very RICH city in Wyoming.
Should a County have well over a year of savings in its governmental fund balances? No, it is not the proper role of government to build heaping piles of cash at taxpayers’ expense.
References below:
http://www.cheyennecity.org/files/sharedassets/public/v/1/departments/city-treasurer/annual-financial-reports/fy2024-annual-financial-compliance-report.pdf
In the case of Evansville, there may be good concern for the loss of revenue. But the impact cannot be determined without a better analysis as the financial statements are not specific enough to determine the impact of just an electricity cut. It is clear from their financial statements that property taxes are a much smaller component for revenue that the rest of the taxes. There is no breakout on the sources of revenue to be able to know the impact to Evansville.
The legislature has been presented a problem with greatly increased tax windfalls to counties and cities with increases in property assessments, and other taxes that are inflation proof. About 2/3 of counties have fund balances that exceed expenditures. Would it be great if the typical family had a years worth of savings in their bank accounts? About 70% of cities also have large fund balances relative to current expenditures.
Legislators need to be careful to not hurt small cities and counties who have varying exposures to differing taxes. But is is also clear that large fund balances built on the backs of taxpayers are also a problem.
Additionally, there is currently little auditing done by state government to deter waste, fraud and abuse of public monies. Article 4, Section 14 of our constitution puts that responsiblity squarely in the hands of the legislature.
I pray for wisdom in the legislature, and for better investigation by the press.
Time to cut services or expenses everywhere. It not only rising prices hurting consumers it is the fact wages have not kept up with rising prices. Part of this is wages are kept down by our own US government letting in illegals and even bringing them in themselves. Thus stabbing USA citizen taxpayers in the back. Time to cut Congressional retire benifits and perks. Same with all state legislatures perks. Plus limit spending by lobbyists. Set a hard limit on that. $1000 a year should do it.
Agree on cutting Congressional salaries and perks, no member of Congress should be paid more than the average annual income in their district. A couple of questions on the rest. 1. What state, county or city services that you personally receive are you willing to eliminate? 2. What perks do you think the state legislators receive? 3. Do you understand that spending by lobbyists in Cheyenne actually generates sales tax revenue?
Another Five and Dime policy set in place to disrupt the ability of towns that rely on taxes to sustain their infrastructure.