‘Tax swap’ bills punish poor, enrich wealthy homeowners

The Wyoming Legislature convenes on Feb. 9

The issues you care about are up for debate at the legislative session. Keep tabs on Wyoming politics and policy with our free morning newsletter.

Sign up ✉️

Have you ever wondered how a bad bill manages to work its way through the Wyoming Legislature?

Here’s an example of a particularly disturbing one that’s only partway through the process: It started when Sen. Bob Ide, R-Casper, proposed eliminating all property taxes last June. That move would have cost Wyoming a whopping $2 billion in tax revenue.

His phony rationale was that the tax breaks the Legislature approved in the last two years — including a 25% reduction on the first $1 million of a home’s fair market value — were too complex. Gee, how could taxpayers determine what exemptions they qualify for, when and how to apply, and which forms are required?

So, to fix a non-problem that he and other far-right legislators created, Ide had a eureka moment: Just abolish all property taxes! He convinced colleagues on the Joint Revenue Committee to have staff draft such a bill.

A constitutional amendment is required to eliminate any state taxes. A resolution must be approved by two-thirds of both the House and Senate, then put on the ballot in the next general election. It would need a simple majority to pass.

But there were many problems with Ide’s proposal, beginning with $2 billion in lost revenue from eliminating residential, commercial, industrial and personal property taxes. How would the state make up the loss of so much money?

Ide proposed raising the state’s sales tax, which would be just about the goofiest thing Wyoming could do.  

“A sales tax is the only way we’re going to muck out all of this layered minutia of property taxes,” Ide said. I’m surprised he could say that with a straight face.

Opponents immediately detailed the folly of this approach. The state’s 4-cent sales tax raises about $950 million yearly. That’s more than a billion dollars short of what all of Wyoming’s property taxes annually raise, so the state sales tax would have to be at least doubled to make up the difference. 

Why would anyone think the average Wyomingite wants to pay 8 cents in sales tax, on top of 1-to-3-cent optional city and county sales taxes for local projects? 

By the committee’s next meeting in August, much had happened to change the state’s tax landscape. Those skyrocketing property tax hikes that prompted the tax breaks had fallen to normal levels in many counties. 

Opponents of the 25% across-the-board tax break had correctly predicted the Legislature’s failure to “backfill” the lost property tax revenues that fund public services like police, fire protection, parks, libraries, roads and other infrastructure would force small cities and counties to make substantial and unpopular budget cuts.

The panel also learned not everyone agreed with the Legislature making more property tax breaks a top priority, much less eliminating the taxes.

Laurie Longtine of Casper was one of about two dozen homeowners who urged lawmakers against further property tax reductions.

“Property tax is how we pay for the things we value,” Longtine said. “It is a responsibility we accept as part of being a caring member of our communities. It is a part of how we take care of each other.” 

Last Wednesday, the committee voted 9-1 to sponsor a watered-down version of the bill that would only eliminate residential property taxes. It voted 8-4 for a “trigger bill” to raise the state sales tax by 2 cents if the amendment is approved by voters. 

It’s still a terrible idea that should die a quick death when the general session starts in February, but it may not. Lawmakers know anything that lowers the tax burden on voters is a great campaign issue, and many will be willing to pass a sales tax increase if they can sell the notion that it’s the best way to equalize taxes for all.

But it’s a laughable claim. A sales tax is a regressive tax, because it requires a greater percentage of income from people with less ability to pay, and a smaller percentage from those with higher incomes. The fact that everyone is paying the same 4-cent tax on goods doesn’t make it “fair.”

Let’s call the Joint Revenue Committee package what it is: reverse-Robin Hood measures that take from the poor and give to the rich. It benefits the rich entrepreneur in Jackson way more than the blue-collar miner in Gillette.

The Center on Budget and Policy Priorities described the tax changes Wyoming lawmakers are considering — swapping property taxes out for sales taxes — as making state and local taxes “even more rigged in favor of the wealthy.”

The Institute on Taxation and Economic Policy, a progressive think tank, said that on average, the lowest-income 20% of taxpayers face a state and local tax rate nearly 60% higher than the top 1% of households. 

Beth Blackwell, the city of Newcastle’s grant and loan specialist, testified that moving to sales taxes, a more volatile revenue source, will make it difficult for local governments to budget effectively.

“Listening to all of this, it makes my stomach hurt in the sense that you are cutting off the legs of our communities and pulling the blanket out from under them,” Blackwell said.

“Eliminating residential property tax is not reform, it’s destabilization disguised as relief,” said Josephine Carlson, a Wyoming resident. “Property taxes fund the backbone of community safety.”

Another concern is that special districts like hospitals and community colleges are only funded by residential property taxes. The committee’s bills do not address how special districts that have chosen to tax themselves for local projects and build institutions will make up the lost property tax revenue.

Wyoming Department of Revenue Property Tax Division administrator Ken Guille said these special districts may also have incurred debts, based on borrowing assessments drawn from their local property taxes. Who will pay these loans off?

The timing of this major taxation change is concerning in light of the decline in state and federal support for local governments. The Center on Budget and Policy Priorities advised states not to pass bills like this any time, but especially when costly private school voucher programs threaten to defund public schools, and federal budget cuts will shift the cost of paying for health care, food assistance, education, and other investments further onto state and local governments.

The good news is that the two bills must survive the legislative process, and this is such a bone-headed move that even the Wyoming Freedom Caucus, which controls the House, may not be able to sell it. But if the Legislature manages to pass both measures, voters will have the final say.

There’s still plenty of time to kill this tax swap, but don’t sit on your hands and waste a chance to let your legislators know it’s a move in the wrong direction. It will hurt low-income people and allow wealthy homeowners to make even more money by not having to pay property taxes.

Legislators, put this dud in your proverbial box of bad bills and don’t ever let it out.