Not all tax bills are created equal.
Some increase the amount of money flowing into the state’s coffers with new taxes, higher rates or repealed exemptions. Others, however, reduce the state’s income with new exemptions and credits or lower rates.
Few will be surprised to learn that the latter far outnumber the former in a typical Wyoming legislative session.
How has that affected lawmakers’ collective opinion of revenue issues and how is that reflected in the bills they’ve proposed?
Overall, there are about 24 tax-related bills on the legislative roster this year. Of those,18 would increase revenue and six would cut it. In earlier general sessions, that ratio was always reversed. Some sessions would find virtually no revenue enhancements, but plenty of bills calling for revenue reductions.
A number of “old friends” — bills that have appeared, and been shot down, before — can be counted among 2021’s revenue-enhancement bills.
House Bill 26 – fuel tax, calls for a fuel tax increase. This tax was last raised in 2013 to make the Wyoming rate comparable to neighboring states. The same situation presents itself today. The measure is expected to generate about $60 million for state and local governments, if adopted.
The largest revenue-generating bill on the docket is House Bill 182 – Personal income tax. It calls for a simple 4% levy on adjusted gross income but — as is required by the Wyoming Constitution — credits filers for excise and property taxes paid. The requisite credits mean that the income tax would, in practice, only be paid by high earners. The fiscal impact would amount to $337 million annually.
House Bill 168 – Sales and use tax application, would broaden the existing sales and use tax to mirror that of some neighboring states. It would add many services like accounting, consulting and architectural work — all of which are currently untaxed — to the list of taxable transactions. This is another old friend from prior years. It could produce new annual revenues to state and local governments of about $105 million, if not more.
House Bill 200 – Sales and use tax exemptions – repeal targets the long list of goods and services that currently enjoy a free pass in Wyoming’s tax system. Legislative staff haven’t yet calculated the fiscal impact of this blanket repeal.
House Bill 138 – Tax on unearned income is a novel revenue bill the likes of which our Legislature hasn’t seen before. Broadly speaking, unearned income is income generated from interest, dividends and capital gains and specifically excludes wages and salaries. The structure of the tax is tilted toward higher income households — it applies a 4% levy on unearned income above $200,000. In addition, a credit is applicable for excise and property taxes paid by the taxpayer as required by the Constitution. If enacted, the annual revenue to the state would amount to about $60 million according to the fiscal note.
If House Bill 211- Property taxes is adopted, it would phase-in an increase to the assessment rate on industrial and other property as defined by statute. It would increase revenue from property taxes by $90 million once the phase-in is complete.
House Bill 224 – Severance sales and use taxes would transform the mineral severance tax for oil and gas into a sliding scale based on the price of the products. Adding to the complexity of the measure is an offsetting rise in the state sales and use tax rate when a drop in severance tax revenue occurs.
The last of the larger revenue producing bills is House Bill 128 – County option real estate transfer tax. This tax would be applicable to real estate transactions that involve more than $1,000,000. The rate would be 1% on that portion of the sale price that exceeded one million dollars. Since this is a local option tax, it would only be attractive to counties with extremely high real estate values — like Teton County, home to the bill’s sponsor Rep. Andy Schwartz (D-Jackson).
Three revenue bills deal with renewable electric generation. House Bill 108 – Wind energy production tax, would increase the generation tax rate on electricity produced with wind turbines. Similarly, House Bill 28 – Wind energy tax-repeal, calls for the end of the current exemption during three years of operation. Although Wyoming contains very limited commercial solar electricity, House Bill 94 – Solar electricity generation-taxation , if enacted, would tax solar electricity at the same rate currently applied to wind generation. Together, if all three of these taxes were enacted, they produce about $16 million in new revenue.
Another trio of revenue proposals deals with so-called sin taxes. House Bill 169 – Alcoholic liquors-markup amount would increase the wine and spirit markup from wholesales prices by three percentage points and would generate $3.2 million from the Wyoming liquor division. Tobacco products would be taxed at an increased rate in House Bill 55 – Tobacco tax, and generate approximately $7 million in new state revenue. Finally, another bill, Senate File 123 – Lottery games-Keno would expand legalized gambling in the state by adding a new Keno game on existing video lottery machines that were first introduced about a year ago. About $1.5 million is forecast to be returned to the state by this new game.
One bill was submitted that would have repealed the excise tax exemption for large data centers. This bill has already been defeated as virtually all bills in the past that have dealt with ending a tax exemption.
Finally, the appropriations committee has sponsored a bill dealing with fees for certain services provided by a variety of state agencies. House Bill 49 – Agency fee revisions, could raise revenue to the state by about $1.5 million.
One might suspect that the sheer number and variety of revenue-enhancing bills indicates a lack of legislative consensus about fixing the state’s fiscal condition. However, on the bright side, it also means lawmakers have a big box of tools to work with. A multiplicity of combinations and subsets of these bills could be assembled into a feasible solution to the state’s current fiscal woes.
In the grand tradition of the Wyoming Legislature, there are, of course, also bills that would reduce revenues to the state by changing tax rates, adding new tax credits and, of course, providing for new exemptions.
Two of these bills deal with oil and gas production taxes. House Bill 11 – Oil and gas production tax exemption, sponsored by the Minerals and Economic Development Committee, would reduce the severance tax rate by one-half provided oil and gas rates rise above certain threshold prices. However, the duration of the reduction is limited. The logic behind the bill is that producers would have an incentive to continue operations in Wyoming as opposed to moving their production to other oil and gas producing states when oil and gas prices recover. The fiscal impact of this bill is estimated to be a loss of $13.5 million.
Yet another measure, House Bill 145 – Stripper well tax exemption would permanently eliminate the ad valorem or property tax on all oil produced from stripper wells. The associated reduction in property tax revenue in the state is expected to be about $2.7 million.
Two other revenue reducing bills deal with new tax exemptions. Senate File 135 reduces the taxes on certain personal property. The personal property associated with this bill is limited to small amounts of business property amounting to less than $2,400 in fair market value. Such personal property accounts have been proven by county treasurers and assessors to involve far more in administrative costs than the revenue generated. The fiscal impact for the entire state only amounts to about $55,000.
Another bill, House Bill 134 – Lodging tax-exemption for residents, would keep Wyoming residents from paying the newly enacted tourism tax.
A tax credit is provided in House Bill 147 – Education expenses tax credit to parents of children who are eligible to attend a public school, but have opted for their children to attend a private school or choose to home school them. The bill calls for a property tax credit to the household equal to $1,000 per child. Thus, a taxpayer would be exempt from paying county, city, and school taxes, as compensation for not sending their children to a public school. The bill is expected to reduce revenue to local governments and schools by about $5 million per year assuming that no new students would be induced to leave the existing school districts in return for the tax credit.
As a point of interest, in 2015 when the state was not as starved for revenue as now, there were only three bills filed that dealt with increasing revenue. In contrast, seven bills were filed that called for reductions in tax revenue. They included new excise tax exemptions, reductions in tax rates and lowering of user fees. About half of them passed.