A lot of blood, sweat and years went into the fight to remove state sales taxes from groceries in Wyoming. It finally happened in 2006.
Former State Rep. Ann Robinson (D-Casper) spent eight years bringing bill after bill to the Wyoming House before finally seeing the food tax exemption pass as a state budget amendment. This session, though, the exemption faces its first serious threat in 13 years, and she’s not happy about it.
“It’s a bad idea,” she said, correctly in my view. “It doesn’t speak well of the Legislature that they would even consider putting the sales tax back on groceries. Most other states have all recognized how it helps people [to remove it]. Why would we want to move backwards?”
Why indeed? It wasn’t easy to obtain a major tax exemption that took money away from cities, towns and counties, but the state had a surplus that year which helped carry the day. If it hadn’t, the soon-to-come recession likely would have kept it from happening.
House Bill 67 sales tax revisions, sponsored by the Joint Revenue Committee, would put the sales tax back on groceries and remove a host of other sales exemptions for services and industries.
The primary argument against the panel’s bill is the same as the original case for the exemption: A tax on food is a regressive tax, meaning it disproportionately affects lower income citizens. Poor people pay a higher percentage of their income on essentials like food and thus are hit the hardest by such a tax.
Opponents tried to make the case that because everyone paid an equal amount – the 4 percent state sales tax – it was fair for everyone. But unlike a rich woman’s choice between buying a Ferrari, a Corvette, or no car at all, it’s not as if someone can simply choose not to purchase food. People already struggling to make ends meet and to obtain a nutritious diet significantly benefit by not having to pay a sales tax on the essentials of life.
Robinson said former Democratic Gov. Dave Freudenthal was initially “kind of lukewarm” about the idea but came around, understanding that it was the right thing to do.
Convincing legislators was not easy but Freudenthal played hardball. The governor found that the Legislature had blurred the extent of the surplus, pulling a fast one by stashing money into a reserve account instead of putting it back into the General Fund, she said.
“The governor realized that there was a provision in the statutes that if there was at least $38 million (left) in the General Fund, he could take half a percent off sales tax,” Robinson recalled. “The Legislature got around this by sweeping [a portion of] the surplus into the budget reserve account so the governor couldn’t do that.
“So Freudenthal told them if they didn’t have the exemption for the sales tax on food, he would take a half-cent off the tax, which was way more [of a loss] than the tax on groceries would be,” she added. “He said if the money was put in the reserve account, he would just line-item veto that portion in the budget bill, so they reluctantly passed it.”
Robinson was the second generation in her family to try to lift the sales tax from groceries. Her father Alfred T. “Lefty” Graham, who served in the Legislature as a Hot Springs County representative from 1973-78, tried to accomplish it, too.
She noted only seven states fully tax groceries, and three of them have a mechanism to give a tax credit or a tax refund to certain individuals, including low-income and senior citizens. Four states have a reduced sales tax rate between 1 percent and 1.75 percent on groceries.
“Most states on their best days aren’t in as great of financial shape as Wyoming is on its worst day,” Robinson said. “Why do we want to be one of the small minority of states that tax a very basic need?”
Robinson said she still hears from people on fixed incomes or raising young families that it has helped them pay for their groceries. She related that every year she would save the amount of money projected that a family of four would save by not paying the sales tax. “We could buy several weeks of groceries with that amount,” she said.
Some legislators tried to make it a welfare issue, Robinson said, but food stamps are not taxed. “It’s not related to any kind of welfare program at all; it’s just trying to help the working poor buy groceries,” she noted. “That’s who it helps most. We should be making it easier for young people to stay in our state, not harder.”
Robinson said she sought a Republican senator to sponsor the bill and then-Sen. John Barrasso (R-Casper) agreed to carry it in the upper chamber. Years later, when running to retain the U.S. Senate seat he’d been appointed to fill upon the death of Sen. Craig Thomas, Barrasso touted removing the sales tax from groceries as one of his top state legislative achievements.
Some local government officials opposed exempting groceries because it took money out of their already strapped budgets. Proponents, however, said that the pain would only be short-lived because the Legislature would develop a method to make municipalities and county governments economically whole.
It never happened. Many local governmental entities have been complaining ever since, and they’ve had to either learn to live with the situation or beg the state for special appropriations.
But it’s important to remember that while the failure to keep its promise was a mistake the Legislature should never have made, it doesn’t mean that the grocery tax exemption wasn’t the right thing to do. It clearly was in the best interests of our most vulnerable residents.
The Revenue Committee added a carrot to HB67 that is meant to attract public support for the measure. The bill would broaden the list of transactions that are subject to a sales tax but reduce the state sales tax rate from 4 percent to 3.5 percent. It’s a terrific enticement, but cold comfort for poor people. Paying 3.5 percent to feed your family is still a jarring change when your budget is based on paying zero.
All of the proposed changes taken together are expected to be revenue-neutral. The net result is that it would simply broaden the tax base.
“Why put taxes back on people if they generate nothing [extra]?” Robinson asked. “It doesn’t make any sense.”
I agree. I can see how ending the tax exemption on manufacturing equipment would raise tens of millions for the state, and it should be included in HB67. But every time past Legislatures have attempted to remove exemptions, lobbyists for the industries affected have lined up to testify that it would be a severe hardship for the companies they represent.
Robinson said she’s willing to go to the Legislature and testify when the bill comes before the House Revenue Committee. “People really need to contact their representatives and express their objections,” she said. “They need to ask them to remove it from the bill.”
Robinson said the staunchest adversary of her bills was always former Rep. Rodney “Pete” Anderson (R-Carpenter).
“When it passed he stood up on the floor and said, ‘This is the greatest boondoggle the Legislature has ever passed.’ But the next year he sponsored a bill to make the exemption perpetual.”
That meant the Legislature didn’t have to put the exemption in the state budget every two years, because it was automatically included.
I vividly remember how much Anderson hated the idea of not taxing groceries. He seemed to fight it with every fiber of his being. His intensity was reminiscent of Sen. Charles Scott (R-Casper) arguing tooth and nail the past six years against Medicaid expansion, which would also help the working poor.
So I have hope that if Anderson could finally be swayed to not only support the tax exemption but try to make it permanent, there’s a chance some members of the Revenue Committee and others will change their minds.
In Wyoming, it’s hard enough for the working poor to feed their families on one or two or three part-time minimum-wage jobs with no benefits. The last thing we need to do is stick them with more of the bill for funding government.