Revenue Committee to wrap stormy interim with votes

The Joint Revenue Committee wraps up a long and tumultuous review Wednesday when it considers bills to increase property and sales taxes and extend the sales levy to include services that are not taxed today.

Originally slated for votes on Dec. 4, the committee postponed the bills — their most significant tax-reform proposals — in the face of increasingly positive revenue projections. Thus far, nine months of meetings have resulted in committee sponsorship for a bill to raise the cigarette tax by $1 a pack, and a bill to raise wholesale liquor prices. In Wyoming liquor is distributed by the state, making a wholesale price increase a revenue generator for government.

The cigarette tax and the liquor markup could together generate around $32 million in new tax dollars a year. The cigarette measure could cut smoking by 12 percent, Legislative Service Office researchers estimated, which carries some health care savings.  

The Revenue Committee began the year with more ambitious goals, however. Legislative leadership asked the group to propose tax and revenue diversion packages that could raise $100-, $200- and $300 million to help plug deficits in both general government and education funding. Some of the ideas committee members considered for rearranging existing revenue were taken up by the Joint Appropriations Committee. But barring a vote to endorse tomorrow, no significant tax reform bills will hit the House floor when the Legislature convenes in mid-February.

Long, strange trip

The Revenue Committee quickly became one of the year’s most controversial assemblages. Committee members gathered 13 times since the last session ended and brainstormed $477 million in potential new revenue spread over eight draft bills. The work spurred anti-tax resolutions from at least six county Republican parties, plus one from the GOP’s central committee.

WyoFile’s coverage of the committee, and the debate its deliberations inspired about Wyoming’s energy-dependent tax system, included 12 stories. You can find those hyperlinked throughout the summary that follows.

At a meeting in Saratoga in May, the committee voiced new resolve against the industry lobbyists that have crowded its rooms for years, testifying against any tax that might affect their clients. Lawmakers also received a presentation from research staff on how Wyoming’s tax structure compared to other states. Among the takeaways: Wyoming essentially replaces income taxes with severance taxes. It also has the lowest beer tax in the nation. A bill to raise the beer tax failed in December, while an income tax was often alluded to but never officially considered.

Public pressure against tax increases began in June when Senate President Eli Bebout collectively warned the Revenue Committee and Select Committee on School Finance Recalibration against tax hikes. Wyoming’s “silent majority” backed him, Bebout told WyoFile.

Meanwhile, WyoFile examined the imbalance between taxes paid by the energy industry and taxes paid by the rest of the state. The gulf is wide enough to question the impact of much-touted economic diversification on state revenues, WyoFile found. At the same time, the state continues to cling to sales tax exemptions that forstall much-needed revenue and fail to attract business, House Revenue Committee Chairman Mike Madden said.

Tax reform momentum seemed to continue through August, when the committee met in Thermopolis and commissioned draft bills for six tax proposals. The Wyoming Education Association released a poll that month, attempting to suss out how Wyoming’s “silent majority” felt about tax increases versus education funding cuts. More than two-thirds of voters prefer tax increases, they found.

Next members of the tourism industry — represented through the Wyoming Office of Tourism, a state agency, and the Wyoming Lodging and Restaurant Association, a trade group — proposed a tax on itself at a meeting in Buffalo in September. Though initially popular, that effort has since faltered. Prominent lawmakers, including Bebout, proposed a lodging tax that would be borne more by visitors, capturing less from Wyoming residents who frequent bars and restaurants. The bill will be voted on tomorrow. Not every committee member was present in Buffalo, however. Three skipped out for a convention on balancing a different budget — the federal one — in Phoenix.

Political pressure mounted as the tax discussion continued. At a November meeting in Cheyenne, party secretary Charles Curley took advantage of a public comment period to deliver a resolution from the Wyoming GOP’s central planning committee: Drop the tax talk. Curley’s booming voice brought an element of political theater as he told a crowded committee room what the Legislature needed was not taxes but a return to “the fiscal probity and restraint of which Wyoming was once justifiably proud.”

At least six county parties have so far echoed the central committee’s resolution, including in Lincoln, Crook, Natrona, Uinta, Laramie and Campbell counties. Perhaps with that anti-tax momentum in mind, prominent lawmakers on the Select Committee on School Finance Recalibration offered their colleagues on the Revenue Committee a morale boost, and perhaps some political cover, before what was supposed to be a big vote in December.

Positive revenue reports combined with growing anti-tax sentiment in the Republican party to complete the headwind that might stall tax reform. In October, and then again in January, economic analysts delivered estimates of $340 million in unanticipated revenue. Still, as House Appropriations Committee Chairman Bob Nicholas pointed out Jan. 15, the state still has an $800 million shortfall between projected revenues and government and education funding. For now, that’s largely covered with savings.

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Madden called the revenue committee’s work a success in some respects, regardless of tomorrow’s votes.

Madden has been a vocal proponent of upgrading Wyoming’s tax system, which depend heavily on the energy industry. However, recent revenue projections show an increase that made any major tax hike unnecessary for now, he said.

“I don’t feel the need is as burning as it was eight months ago,” he said. He called the economic reports conservative, and said he believed rising crude oil prices could generate even more revenue than was predicted.

The imbalance between the taxes paid by the energy industry and those paid by the rest of the state’s residents and businesses persists, he said.

“We still have the ‘if you don’t pay you don’t pay attention’ syndrome,” he said.

The Revenue Committee’s work can be compared to the Tax Reform 2000 report, Madden said. That effort was compiled by a committee of economists and legislators, who compiled recommendations to fix the state’s mineral dependence during a bust in the late 90s. The report was shelved when a coal bed methane boom began the year following its completion. Like the report, which concluded a personal income tax was the best way for Wyoming to ensure revenue stability, the bills rejected by the committee tomorrow can await a different economic and political climate.

If the economy doesn’t improve, Madden said, “[the bill drafts] are still going to be on the shelf and be available.” Perhaps next time the dilemma won’t arise in an election year.

“Some people worry about elections,” Madden said of the pressure his committee faced. “I don’t worry about them … but some people are more sensitive to that then they should be.”

CORRECTION: This story has been updated to correctly reflect the amount of new revenue that could potentially be generated by a cigarette tax and liquor markup. The two measures together would generate around $32 million a year, not $10.2 million as was originally reported.