Once again, Wyoming faces tough times; once again, we have to figure out how to pay for the services we use and need and want. A budget has two sides, revenue and expenditures; a budget crunch has two sides too — revisiting the revenue structure, along with cutting spending.
Today we bring you a tale of two Wyoming House Revenue Committee chairmen. John Hines was chairman in the year 2000, when we faced another bust and with it a budget crunch; Mike Madden is chairman today.
John Hines, and a team of legislators and citizens who huddled for two years in an effort called Tax Reform 2000, dared to utter the deadly words “income tax.” Turned out no one had to enact one — the bust turned into a boom soon after. But it took a lot of courage even to say the words, here in Wyoming.
Mike Madden is getting ready to help take the Joint Revenue Committee, and anyone else who will join in, through a serious discussion of all kinds of tax issues. He doesn’t think an income tax will be necessary, much less popular. But he, too, boldly uses those dreaded words.
Both these guys are real leaders, and they make the key point. I’ll say it again here: we have to figure out how to pay for the services we use and need and want. And minerals are just not likely to carry the freight for us anymore. We have to figure out how to do it differently.
Read what they say, and think about the heavy responsibility that legislators and all of us carry now, to plan for the future of Wyoming. We must consider what kind of state we want to live in, and figure out how to ensure we’ll have the money we need in order to have that kind of state. Learn the facts (we’ve put in a lot of handy links, to take you to reports on the details,) put your comments in right here on WyoFile, talk to your legislators, and get involved. Wyoming people can make this decision a good one if we work together as we have in the past.
We have to figure out how to pay for services we all use
by John Hines
While the big discussion today for many people is the reduction of income for state and local governments, to some of us it is not really news, as we lived through the same type of period during the 1980s and 1990s. As I recall, after my first election in 1984 there was very little increase in revenue until the coalbed methane boom and continued coal development, starting around 2000. I served on the House Revenue Committee for most of that period and then as now you find most people want the government to spend more money but very few support any increase in the taxes they have to pay.
I believe the current figures are that a family pays roughly $3,000 in taxes and receives around $30,000 in government services. I have found that most people support cutting government spending as long as it doesn’t affect the programs they support or receive services from, for themselves or their businesses.
To address this in the 1990s, the Legislature passed and the Governor signed this bill we called Tax Reform 2000. The Governor appointed six legislators and five public citizens to study taxes and revenue and arrive at a conclusion that was fair to everyone, both individuals and businesses. I was elected chairman of this committee and we met monthly for two years. We looked at every state’s tax structure and how they raised revenue. We had public input at every meeting we held.
We voted 8-3 for an income tax
It was a very interesting and educational committee to serve on and if such a study were held today I would guess most of the information found would be much the same. Among the many things we looked at was exemptions. We eliminated two. After revenue increased in subsequent years, several more exemptions have been added.
I hesitate to bring up the committee’s recommendations because at that time we knew they would be controversial, and they were…. I feel not much has changed in the public view about taxes over nearly 20 years. Perhaps today there is an even stronger anti-tax feeling by the public. The one recommendation that could bring more stability to Wyoming’s tax structure was an income tax for individuals and corporations. It is a tax for which the base is the same for everyone — and that is, ‘how much money did you make.’ The committee voted 8 to 3 to support this recommendation.
What happened after Tax Reform 2000 was that mineral prices rose and continued to increase or stay higher for the next 15 years — and other than a lot of criticism of the report, not much was done. Today the problem is larger because most all aspects of government have grown. Big growth in education, healthcare, economic development and payments to local government. These are just a few of the growth areas — but large ones. As Wyoming population has increased, so has the demand for services. Business don’t or can’t pay enough taxes to support their employers — government regulations, general high cost of most everything government does has increased. These include insurance, construction, retirement plans and the list goes on….
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With the federal government war on fossil fuels, especially coal, I do not anticipate any sudden change that would greatly increase Wyoming revenue. We are at that point where soon some big changes will need to be made. Spending Wyoming’s savings accounts will only last a short period of time and of course the biggest savings are in the Wyoming Permanent Mineral Trust Fund and cannot be spent by the Legislature. This fund was set up and passed by the people of Wyoming in 1974 as a constitutional amendment. That part of the Wyoming Constitution (in Article 15, section 19) provides that only the income earned on the fund can be spent.
I do not have a recommendation for the problem today, that will be up to the elected officials. I do recommend that the people become informed on these issues and try to help solve the problems, not just be against every change. We all receive many services from our governments so it should be up to us to decide which services we can do without — those that benefit us directly, not just the ones that other groups receive — or which ones we want to continue and how we are willing to support those with our taxes.
More people need to understand our revenue structure and how many dollars it brings into our state and local governments.
(Read Rep. Mike Madden’s Pete Simpson Forum piece on these tax topics.)
Republican John J. Hines served 30 years in the Wyoming Legislature representing Campbell County. Eighteen of those years were in the House, and 12 in the Senate. He served in the leadership in both chambers, and as president of the Senate. He is currently managing his family ranch, which was started in 1901 — Ed.
Income tax is the wrong answer to this problem. Increasing sales tax, looking at sales tax exemptions, and gas tax all are better solutions.
I think taxing employers and employees for working is just a bad idea. On the other hand, a sales tax allows citizens the ability to save money and purchase the things they need. If they can afford to be extravagant, they can afford the taxes.
One thing worth remember: Wyoming has a ton of tourists every year. Every time they purchase an item or buy some gas, they are contributing to our tax base.
Just my $0.02.
Rather than seeing environmental rules connected with carbon emissions as a punitive attack by the feds on Wyoming’s economy, perhaps we should be attracting green industry to the state. It would be more beneficial to become leaders in innovation than to continually look at our empty pockets while we bemoan changing times. Other industries have come and gone over time, and the survivors were the innovators. We have models across nations to observe and improve upon.Instead of hoping for a return to the good old days of oil and coal extraction, I am hoping we will be retraining our labor force for new and exciting careers. Taxation or carbon are not the only ways to make money.
First – I would like to see the independent third party analysis where Wyoming citizens receive $30,000 in government services for our $3,000 of state tax payments – are we all really clamoring for this so called $30,000 in services? Wyoming household income is $56,000 according to the most recent data available – so that means more than half of a household’s income would need to be taxed in order to provide the government services we all supposedly want at current levels if mineral taxes go by the wayside? Those numbers just do not add up – unless of course you put that burden on the 53% of the Country that are already paying the income tax burden in the US.
Second – If your neighbor drives a new Cadillac does that mean you need to drive the same car? Just because another state or local jurisdiction raises their fees/taxes does not mean the State of Wyoming needs to do the same. If we want to diversify our economy in this state, we need to be competitive with our surrounding states not just impose additional taxes because Colorado/Utah increased their tax burden. We continually promote that we are business friendly in this state, but I am not sure that is always the case when you look at the regulatory and hidden tax burdens.
Third – My professional organization put together a great analysis of the tax burden associated with all of the various fees/taxes that are imposed on taxpayers. I believe the numbers are much larger when you consider some of the hidden costs associated with government compliance disguised as “fees,” but it is a good synopsis of the burden imposed on taxpayers beyond just the income and payroll taxes. If you look up Total Tax Insights on the internet you will find the tax calculator. This is sponsored by the American Institute of Certified Public Accountants. The analysis excludes the regulatory/tax burdens imposed on businesses/employers, another burden we all pay for through higher prices at the checkout stand. Some quick numbers – family of 4, $80,000 a year between two working spouses, two kids, house, two cars, cell phone, cable, etc. Their estimated total tax bill for all taxes, property, phone, gas, income and payroll works out to about $14,000 – 23% of their gross household income.
Fourth – I do not see any mention of the additional state costs to be incurred with the creation of the systems and staff required to collect and maintain compliance with a state income tax. What is the cost creating and maintaining a system compared to the dollars raised? To be frank, we do not need another bureaucratic agency in the State of Wyoming. We already have the Department of Revenue unable to collect all of the tax dollars imposed. If the missed sales tax is so high because of out of state/internet purchases, the DOR should be chasing after those dollars – but they don’t because it is not cost effective.
I work with small business on a daily basis – I see first hand the cost of compliance with they myriad of local, state and Federal compliance requirements. I see the waste that comes with bloated government agencies, the burdens that are imposed on businesses and individuals. Granted, there is a certain level of government we need for the health, safety and welfare of our state. Wyoming is unique in that we know how to fight our way through the booms and busts. Let’s not take the short cut and impose a state income tax because it is easier than challenging ourselves to have a more efficient and effective state government. Once Pandora’s box is open, you can’t close it.
Even a smidgen one-time real estate transfer tax on homes worth over $1,000,000 would have netted Teton County so much cash it’s hard to imagine. With the housing crisis we face there, and the wildlife and open space we need to preserve, we should be thinking seriously about transfer tax. They’ve never kept the super wealthy from living where they want to live, but our real estate lobby is petrified that’s what will happen. I see it as a small fee to pay to protect and support our beautiful county and our state in a time of intense fiscal crisis.
I find it illustrative that although Mr. Simpson, Mr. Hines and Mr. Madden are all quick to “mention” income tax, nobody brings up any of the more modern and conservative taxation proposals that are widely discussed: FairTax, sales tax, VAT taxes, even select excise taxes. I believe that it is counterproductive (literally) to place a tax on earning income, as it places a government disincentive on employment and productivity. This kind of disincentive is so counter-intuitive that its anti-social… and hence immoral IMHO. Just don’t go there. If you MUST raise revenue, why not try a tax on consumption? That would be a LOT more acceptable to me.
Personally, though, I favor tightening our collective belts, rather than confiscating more of Wyoming citizen’s hard-earned money.
Incidentally, I find John Hines assertion that the a Wyoming family pays roughly $3,000 in taxes and received $30,000 in government services is laughable. Talk about your cheap accounting tricks! Is it seriously his claim that government is so productive it ADDS VALUE to the economy? No, governments are ALWAYS a load on an economy. Whatever numbers Mr. Hines is citing dramatically overvalue the services provided.
Thank you for asking the challenging questions/topic Mr. Simpson.
I think we need to look at all avenues to help the state’s economy. One possible source would be to make retailers such as Amazon collect sales tax on purchases sent to Wyoming addresses. Currently people are under the honor code to submit those taxes themselves as no one collects them since there is no brick and mortar buildings of Amazon in the state. I think the state looses out because not very many people keep track of their purchases and sends the money in. By not collecting on internet purchase I believe Wyoming looses out and so do those businesses that have a “building” in Wyoming. It is cheaper to buy the product off the internet, even if the price is the same as there isn’t tax added onto the internet sale.
We also need to look at fees and permits to come into Wyoming. In my industry companies from the surrounding states can get an annual overweight permit to come into the state and tow for $50. (It is $25 a time if not bought annually.) If I were to try to buy the same permit in Utah it is over $600 annually or $60 a time. No wonder businesses can come across state lines to do business in Wyoming. It is cheap to do so. By not setting prices to be close or match the surrounding states we are taking away business from Wyoming companies and giving it to the surrounding states to help their economy.
I appreciated this article and am encouraged that an income tax will again be discussed in the Joint Revenue Committee. I agree with Mr. Simpson that we each have a responsibility to pitch in for services that keep our communities whole and healthy. This may be especially true for those of us who are concerned about the impacts of resource use and extraction on our local and global environments. We can’t criticize the coal and oil & gas industries, then expect them to pick up the tab. An income tax seems like a reasonably fair way to spread out the pain, and reinforces that each of us is part of both the problem and the solution.
It is good that Wy. Will be looking at current sales tax exemptions.
The trona industry was given a sales tax exemption that helped it get started & grow . Now our trona industry is strong and the exemption was set to be removed in 2010 I believe. However it was not. It was extended.
I agree with Rep. Madden that the state should look closely at the tax exemptions we currently grant. Basically those exemptions represent money just leaving the state.
Senator Hines is refreshingly clear & honest on this subject. His experience of going through an economic bust while in the Legislature is extremely valuable to us all in Wy.,, currently.
One source of revenue just about as unpopular as the income tax would be to increase the gas tax.
Our roads & bridges require a healthy budget. The gas tax is a user based tax. Our current gas tax is lower then surrounding states.
I believe 40% of the gas tax would be paid for by out of state users passing through Wy. On our roads.
Just a thought.
I believe most of the WYDOT funding excluding the Federal contribution comes out of our general fund.
Having served in the Legislature I would not want to be the one proposing this on the floor, for fear of hoots , hollers & flying vegetables.
The fuel tax was raised in 2013 by 10 cents so it now totals 24 cents which got us up to the average of surrounding states. However some of these states have raised their fuel tax since that time. Even thought nearly all industries and everybody else supported it, I still am getting scars from being the floor leader in this battle.
Mike Madden
Dist. 40 Rep.