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How does Wyoming’s tax structure compare to other states?

Wyoming’s sales tax is the 44th lowest in the nation, and its tax on beer is the 50th, unchanged since 1935 when it was set at $0.02 a gallon. Its property tax for homeowners is 46th lowest. Wyoming is one of seven states with no individual income tax, and one of only two with no corporate income tax, South Dakota being the other one.

These comparisons and others were made by researchers from the Legislative Service Office Thursday, in a presentation to lawmakers on the Joint Revenue Committee. The committee was meeting in Saratoga, where it began efforts to right Wyoming’s tippy financial ship by finding new sources of revenue.

The LSO compared Wyoming’s tax structure to its six neighboring states and five others states selected because they have significant mineral production — Alaska, New Mexico, North Dakota, Oklahoma and Texas. LSO analysts relied heavily on data from the Tax Foundation, which calls itself a nonpartisan think tank. The Wall Street Journal has labeled it conservative.

The LSO also looked at employment data. It found Wyoming’s state government had grown at a slightly below-average rate over the last 26 years, compared to the 11 other states. Lawmakers are weighing continuing cuts to education and agency budgets against seeking new revenue sources through taxes. During the last legislative session, cuts won out as many lawmakers argued the state’s government had grown bloated during times of flush revenue provided by the mineral industry.

Severance versus property, income taxes

Wyoming has long been dependent on the mineral industry for a disproportionate share of its tax revenue. In fiscal year 2014, the year used in LSO’s comparisons, 25 percent of Wyoming’s tax revenue came from severance taxes — namely on coal, oil and gas. When the mineral companies’ share of property taxes are also calculated, the industry’s stake in Wyoming’s tax revenue gets closer to 50 percent, Dean Tempte, a fiscal analyst with the LSO, said. Senate Revenue Committee Chairman Ray Peterson (R, SD-19, Cowley) estimated the mineral industry’s share at 65 percent.

This chart shows what components make up the various slices of Wyoming’s tax revenue pie. The full report is found below. (Legislative Service Office)

Of the 12 states included in the comparison, nine impose income taxes. In those nine states, the income taxes equated to an average of 23 percent of tax revenues.

“You could almost look at these [comparisons] and say Wyoming replaces income taxes with severance taxes,” Tempte told the lawmakers.

Neighboring Idaho collected the largest chunk of its tax revenue, 29 percent, from property taxes. Another 26 percent came from sales taxes and 25 percent came from an individual income tax. The state also has a corporate income tax, which made up 4 percent of revenue collected in 2014.

To the north, Montana has no sales tax — with the exception of some sales taxes levied on resorts. The state’s biggest slice of the tax pie came from property taxes, which made up 38 percent. Unlike Wyoming, which charges its highest property taxes on the mineral industry, Montana does not levy a property tax on oil, gas or coal holdings.

On the flip side, Montana’s severance taxes on mineral production are higher than Wyoming’s, particularly when it comes to surface coal mining. Severance taxes made up only eight percent of Montana’s FY2014 revenue stream. However, Wyoming produced more than 9 times as much coal as Montana in 2016.

Alaska, which has also seen revenue slumps from a depressed mineral industry in recent years, received 44 percent of its FY2014 tax revenue from severance taxes. Another 35 percent came from property taxes. Like Montana, Alaska does not levy a property tax on mineral production.

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Of the six states with significant mineral production surveyed by LSO, only Wyoming and Texas assess property taxes on mineral holdings. Texas does not levy a severance tax on coal production, but it does on oil and gas.

Texas’s severance tax made up 6 percent of its FY2014 revenues, while its property taxes made up more than 40 percent.

The LSO also looked at labor data, and found the average growth in government employment among the 12 states was 1.1 percent over the last 26 years, according to the federal Bureau of Labor Statistics. Wyoming’s government jobs grew by 1 percent, LSO found.

“That 1 percent growth is pretty modest,” Tempte said.

The low growth rate would appear to counter a notion of state government largesse popular amongst more conservative lawmakers.

“Balance and consistency”

Wyoming lawmakers write the state’s budget using two-year projections of revenue. Trying to predict energy markets over two years and budget accordingly invites difficulty, Sen. Peterson told WyoFile.

“Most [states] get that corporate and individual income tax to bring them balance and consistency,” he said.

Peterson wants lawmakers to look at some of what he called “low hanging fruit,” like the state’s record-low tax on beer. Colorado’s beer tax is $0.08, and that state is ranked 45th. Wyoming’s tobacco taxes, which LSO ranked 42nd lowest amongst the 50 states, are also a good target, Peterson said.

While politically difficult, raising “sales and property taxes would bring consistency to our revenue stream, no doubt,” he said.

However, he said, any taxes have to be paired with more cuts, particular to education funding. Peterson sits on the Select Committee on School Finance Recalibration, which is spearheading efforts to solve the education funding crisis.

The select committee will be incorporating suggestions from both the Joint Revenue Committee and the Joint Education Committee. The education committee has been tasked with looking for potential cuts. Peterson has consistently argued that education’s budget is bloated and can be cut without affecting the quality of education for Wyoming’s schoolchildren.

Below is the Legislative Service Office’s full report.


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Andrew Graham is reporting for WyoFile from Laramie. He covers state government, energy and the economy. Reach him at 443-848-8756 or at [email protected], follow him @AndrewGraham88

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