Revenue committee has the right idea: Expand tax refund program

One of the biggest disappointments of the Wyoming Legislature’s session this year was how little lawmakers did to provide property tax relief, despite an outpouring of complaints and 21 bills being introduced.

Will 2024’s budget session provide more help to those who need it most: lower- and middle-class homeowners on fixed incomes? And what about disenchanted Teton County homeowners, some of the current system’s most vocal critics? Thanks to soaring home valuations in Wyoming’s wealthiest county, residential property tax rates increased by 36% last year, tops in the state.

Several proposals are being considered by the Joint Revenue Committee, which voted earlier this month to advance three draft bills to the panel’s Nov. 13 meeting in Cheyenne.

The most popular by far is another expansion of a tax refund program that has been on the books for a long time, but wasn’t funded in three of the last 10 years. The committee voted 12-2 in favor of the latest draft bill, which will likely see more amendments when it returns.

The program more than doubled the number of refunds issued last year, a total of 8,813 compared to 3,805 in tax year 2021. Lawmakers broadened income requirements, and refunds increased by an average of more than $300. Qualified homeowners throughout the state received an average of $937.

The cost to the state to help so many taxpayers was relatively low at about $8.3 million. The program ran out of money this year when it exhausted its legislative appropriation, but Gov. Mark Gordon came up with the extra $2 million to pay for it from his discretionary funds.

A whopping 91% of the applicants were approved for a refund. The challenge for legislators next year is to see higher refunds go to even more homeowners, and that everyone who qualifies gets at least some money.

One way to do that was proposed by Rep. Liz Storer (D-Jackson), who wants to add a “stair-step” approach.

Now, homeowners who earn a maximum of up to 125% of their county’s median gross household income qualify for a tax refund. Storer’s amendment increases that percentage to 175%, but for every additional 10% “step” on the scale, there is a corresponding decrease in the refund amount.

It’s an excellent idea. About three-quarters of the taxpayers who qualified for the 2022 tax year received the maximum state refund. But if someone made even $1 over the 125% income level, they got nothing.

Storer played a major role in salvaging one of the few property tax bills that passed at this year’s session.

(Rep. Storer is president and CEO of the George B. Storer foundation, a financial supporter of WyoFile.)

In an 11th-hour compromise, the Legislature approved a Senate joint resolution sponsored by Sen. Dan Dockstader (R-Afton). It originally only called for property tax relief for the elderly and infirm, but Storer added a section from a previously failed bill sponsored by House Speaker Albert Sommers (R-Pinedale).

Because the Wyoming Constitution requires that residential, commercial and agricultural property taxes must be equal, voters would have to pass a constitutional amendment so the Legislature could set residential property at a lower rate than the current 9.5%. 

If passed by voters, the constitutional amendment would create a new class for residential property and a sub-class for owner-occupied primary residences.

While the far-right Freedom Caucus initially opposed the idea, ultimately the group voted for it. Now, the caucus has another proposal it already floated in the last session but was quickly rejected: a 6% property tax inflation cap for residential owners. There is currently no inflation cap on property.

But the cap is a terrible idea. If the fair market value of properties goes up 20% but the state has a cap of 6%, wealthy homeowners who have higher value properties will get huge tax breaks. Nobody doubts skyrocketing home values significantly impact the tax bill of a Teton County resident who buys a $10 million home, but the Legislature’s top priority should be helping thousands of low- and middle-class homeowners.

Most residential property tax revenues go to local governments, and to fund schools. When those revenues drastically decrease, how does the state plan to make up for that loss?

“At the end of the day, the most important thing is you’ve got to backfill our local governments,” Storer told me. “If the state does this, that’s going to cost more than $70 million. And most of that is going to come from Teton County, which represents half of residential property tax in the state.

“All that extra money is going back to Cheyenne, and it’s paying for schools in other places in the state,” she added. “So tell me, where are we going to find that money, until we get serious about some other tax?”

This reminds me of what Sen. Chris Rothfuss (D-Laramie) said earlier this year when the Senate debated another property tax reform measure.

“We took [the sales tax on groceries] away because, ‘Don’t worry, the Legislature will backfill for it,’” he said. “Does anyone here or in the state that’s listening feel like the Legislature has effectively backfilled for the grocery tax?”

Short answer: of course not. Even at the time, I thought assurances many lawmakers made that the state would definitely make city and county governments whole was nothing but hot air. The same thing will happen with lost residential property tax revenue.

Nevertheless, the Freedom Caucus insists on a cap, and it’s likely that the more traditional conservatives, who are unaffiliated with the far-right voting block, may offer their own version. The chances they will offer competing bills, and that one manages to get the two-thirds vote necessary to be introduced in the budget session, are slim to none.  Those bills will just suck time away from real problem-solving. 

Another bill advanced by the Joint Revenue Committee would provide a property tax exemption for homeowners age 65 and over who have paid residential property tax for at least 35 years. The exemption would reduce property taxes by 50% for those who qualify.

A tax relief program targeted toward older residents is definitely needed. It may even lessen the lingering bad taste from the Legislature’s poor record of helping seniors with any kind of tax relief. In 2016, in a particularly callous move, legislators stopped funding for the popular 41-year-old tax rebate for the elderly and disabled, citing reduced mineral severance tax revenue.  

Really? The state voted to put millions in litigation funds to fight obviously unwinnable cases to prop up the coal industry, but it had no money left to help seniors and the disabled? I guess that’s the true Wyoming Way.

An attempt to revive the elderly and disabled tax refund at a much lower cost failed in 2020, though it had overwhelming House support. Then-Sen. President Drew Perkins (R-Casper) shoved the bill in his desk drawer and killed it.

If you sense I’m a bit cynical about the Legislature’s ability to agree on anything when its members are so philosophically divided on many tax reform issues, you’re right.

However, the popularity of the expanded tax reform program bodes well for further improvements, like the stair-step approach, that may help give even more homeowners relief. If that approach is approved, I hope future legislators won’t wake up cranky one day and kill it.

The constitutional amendment next year to create a separate class of residential property taxes is also promising, but it must be accompanied by a statewide voter education campaign to ensure that the electorate knows what’s at stake. Passage of the amendment is likely the best chance Wyoming has to lower property tax rates for the largest number of people fairly.