Wednesday, August 16, 2017

Growing Worry among Taxpayers

The agenda is out for the September meeting with the Joint Revenue Committee. The Gross Receipts Tax is very much on the agenda, though for reasons that are not yet entirely clear they have renamed it "Gross Products Tax". The Committee intends to vote on the tax in November; the September meeting is a stopgap.

I get comments and questions from blog readers about the possibility of tax increases. Most recently, I got a call from someone who was worried about a proposal for a local sales-tax increase. Below is another comment, which I would like to share, as it mirrors the concerns of many voters and taxpayers around the state:
The bottom line is, they are going to do it [raise taxes] anyway. I know teachers who have been sent on Continuing ed trips out of state. At this point skype would have been more feasible. I know districts that have raises. They have no intention on cutting where we need cuts. For the first time in my life we are looking at selling and leaving Wy to SD. I feel like we have been sold out by the people who were supposed to represent us. We pay over 40 percent of our income out as it is. That does not include property tax and all the other fees. To top is off, we are paying $2200 a month for our insurance premiums. It sounds like that will just get worse for private companies in Wyoming.
With the blog reader's permission I shared this comment with our legislators. I asked them what they would like to tell this reader. So far I have received one answer, from Representative Salazar. Here is what he said:
I refuse to vote for any tax increases. I will vote to cut state spending. My constituents cannot afford and will not accept tax increases. Government must live within its means like every family in my constituency.
Thank you, Representative Salazar. I will publish more replies as they come in.

[Update: Representative Gray says that "I’m not voting for tax increases. We need to control expenditure."]

As if a brand new, statewide tax was not enough; as if it is not threatening with possible increases in fees licenses and the state sales tax; cities and counties are also trying to get their hands on more tax revenue. For example, consider this report from Campbell County Commissioner Clark Kissack:
This morning the Campbell County Commissioners passed a resolution to have a special election on implementing a .25% sales tax on all tangible products that will fund the Campbell County Economic Development Corporation and the Gillette College. The vote was 4-1 (Commissioners Bell, Christensen, Avery and Shober for and Commissioner Kissack against).
At the Gillette City Council meeting in Gillette tonight the resolution passed 4-3 (Councilmen Montgomery, Carsrud, Ludvall and Mayor Carter-King for and Councilmen Barks, McGrath and Kuntz against).
The town of Wright vote unanimously for it.
During the City Council meeting there was much discussion about the fact that there is not a MOU completed and agreed upon how the monies will be distributed. Representative Scott Clem spoke to his feeling that the Revenue Committee's tax proposals will be rolled in some fashion during the 2018 Legislative session. The supporters of this resolution admittedly wanted this to pass sooner rather than later and said so openly none of them discounted or even tried to argue Rep. Clem points. The fact that other taxes are coming didn't seem to cause them to flinch.
I, Commissioner Kissack voted against this because I campaigned on no new taxes and no tax increases and will always stand by my promises. I promote the electorate getting to vote on issues, but nearly 11,000 people voted for me and my platform and I heard them, therefore I wasn't willing to ignore their wishes and bring this to them anyway.
Campbell County Commissioner Clark Kissack
A quarter-percent tax increase is in itself small enough to seem, and even be, insignificant. The problem is that when people are already struggling to make ends meet, every penny counts. Furthermore, when we add up many small, insignificant tax increases, the sum total is no longer insignificant. You can jump over many small creeks, but once they merge to a big river, you are done jumping. 

Many small tax increases is a "taxed by a thousand blows" approach to more government revenue. From an economic viewpoint, this approach to higher taxes is particularly harmful. No tax increase is ever good, and any tax increase in bad economic times is, well, bad. But for two reasons, raising many small taxes can prove to be even more harmful. First, the lack of coordination leaves taxpayers with more uncertainty about their future cost of living - or cost of operating a business - than one big tax hike would impose. Multiple, small tax increases imposes a higher "confidence cost" on us as we try to stay on top of the costs of living and doing business. 

Secondly, when many taxes go up in a short period of time, their effect on the economy is protracted and delays any stabilization of business activity and consumer spending, compared to a one-big-blow kind of tax increase. The economic literature is surprisingly clear on this point. 

The more protracted a period of tax increases becomes, and the more protracted the effects are in the form of stagnant - or declining - household and business earnings, the more likely it is that this period turns into a new normal. If it does, it is very, very difficult to pull the economy back up to its previous levels of activity; a protracted period of statist austerity - which is the preferred label for this kind of tax policy - drives away talent, discourages entrepreneurship and redirects business investments to other jurisdictions. As this process continues over time, the image of the economy in question changes, and people and businesses gradually come to think of it as "not friendly" or "too costly".

It is unclear if a "taxed by a thousand blows" strategy will fundamentally alter Wyoming's general reputation. However, the more taxes our lawmakers - state and local - pile on for the coming year or two, the closer they will move our state to that point where we will be better known for a costly business and household economic environment than for our coal, cows and guns.

I should probably add a disclaimer here: none of what was said above shall be construed as an endorsement of a one-blow tax hike of any kind. The last Wyoming needs right now is higher taxes in any way, shape, matter or form. The discussion here only aims to clarify that there are tiers in Tax Hell...

Wyomingites are legitimately worried about their future. The threat of higher taxes is a big source of that worry. The more taxes that may go up, the bigger the worry. At some point, like my blog reader explained, that worry becomes serious enough that people start looking for a future out of state. 

Our legislators, state and local, can make the tides of worry recede. They can all come out, full force, and declare that they will not vote for any tax increases in 2018.

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