My neighbor Nick and I got to talking the other night about Wyoming’s budget problems. With COVID-19 and the coal industry’s collapse, the governor said the state might start abandoning small towns because we can’t afford to maintain their sewers and streets.
Sundance is considering axing its entire police force because the town struggles to pay for it.
Nick and I went back and forth about spending, revenue and Wyoming’s dependence on the mining industries. Then he looked at me and said flatly: “It’s stupid that we don’t pay state income tax here.”
I was shocked. Nick is a Trump-loving combat veteran; he had come over, in fact, to show me his Trump 2020 stiletto pocket knife. But he’s also from North Carolina, where even conservatives understand that public services like police and roads aren’t free.
It’s only in Wyoming that people seem to believe these things just fall from the sky.
The Wyoming Legislature passed its first severance tax on mining in 1969. Ever since, our tax system has leaned more and more heavily on coal, oil and gas companies to pay the bills. As a result, entire generations have come of age in Wyoming with no experience paying state taxes like the rest of our fellow Americans.
Along with having no personal or corporate state income tax, Wyoming also has the third lowest property tax rate in the nation and the sixth lowest sales tax rate. All of this is nice, and it’s been made possible by mining companies covering Wyoming’s costs.
In one of his last interviews, former Wyoming Gov. Stan Hathaway told journalist Sam Western: “I passed the first severance tax. I got the Permanent Mineral Trust Fund. And they’ve carried Wyoming’s expenses very well. But it bothers me that we’ve created something that the majority of people in Wyoming said, ‘My god, this is a free ride.’”
Hathaway did not intend to give Wyomingites a free ride, however. “The truth is,” he said, “we all should pay our share of government costs.”
Instead, Wyoming passed the severance tax out of desperation.
Only $80 left
In the late 1960s, Wyoming’s economy depended on another industry — agriculture — that was rapidly declining. When Hathaway checked the balance in the state’s general fund and found there was only $80, he knew he had to act before the state went flat broke.
Wyoming legislators at the time, like future Gov. Ed Herschler and future U.S. Sen. Alan Simpson, initially opposed the governor’s severance tax proposal. But when Hathaway challenged them to figure out an alternative, they admitted they couldn’t, and they passed the tax.
All this might sound familiar today.
Wyoming currently has more than $80 in the bank. In fact, our “Rainy Day Fund” is among the richest in the nation, with roughly $1.7 billion. But the state is projecting a shortfall of $1.5 billion in revenue over the next biennium.
There are also a couple key differences between now and yesteryear that make our situation more difficult.
First, there does not appear to be a single revenue generator like Hathaway’s severance tax that can replace our disappearing fossil fuel revenues. Taxing wind won’t do it, and neither will taxing tourism. We are going to need a variety of revenue sources to make up for what we’re losing, including — gasp — taxing ourselves.
Second, there are scant few state lawmakers like Hathaway, Herschler and Simpson today who are willing to accept tough solutions to Wyoming’s budget problems. When a Republican legislator proposed a corporate income tax last year — Wyoming is one of two states in the nation with no mechanism to tax corporate profits — it wasn’t even brought up for debate.
Politicians here tend to talk about cutting spending instead of replacing lost revenues, but few offer actual solutions.
It’s hard to blame them — after all, Wyoming is filled with people who have either lived their whole lives here never having to pay state taxes, or who came here specifically because they saw a big neon sign that said “free ride.”
But, of course, the ride was never really free, and the mining companies that have carried the state for 50 years are now asking for their own tax breaks.
Wyoming, like everywhere else, needs schools, roads, hospitals, firefighters, and other basic public services. And like Nick said, believing we can have these things without paying taxes is just stupid.