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Friday, September 15, 2017

Prosperity or Taxmageddon

Yesterday's article about the potential for growth and prosperity here in Wyoming attracted a lot of interest. Thank you! I cannot stress enough how important it is that we continue to expand the conversation about our state's economic future. From now through the election next year, we have the opportunity to decide our state's future in a way we have not seen in a very long time. Either we go down the path of the welfare statists and squeeze every drip of blood we can out of the taxpayers in this state; or we decide to be bold, brave and free and set course for prosperity and limited government. 

There are some key events where we will get to decide which route to take. There are legislative committee meetings this fall, among them the Revenue Committee meeting in November where they will decide on what package of tax increases to send on to the 2018 legislative session (here is the latest idea). Will they suggest tax hikes of $200 million? $300 million? $400 million?

But that is not the only meeting worth keeping an eye on; click here for a full list of legislative committee meetings from now through the end of the year.

There will also be some further coordination between Governor Mead's ENDOW initiative and committee meetings, primarily the Economic Development Committee. That committee meets again in Casper in October; are they going to have another conversation about the idea of creating a state-run airline? It is not entirely clear how much this idea would cost, but hopefully it won't add more than $100 million a year on the backs of taxpayers. (I am working on a more detailed estimate.) Whatever the cost, it will come on top of all the other taxes that are being discusses in the Revenue Committee.

Then, of course, there is the 2018 legislative session, and then the battles begin for the elections in November next year. the open gubernatorial seat. Hopefully, everyone will be involved in the choice between Taxmageddon and prosperity: incumbent legislators, their challengers, gubernatorial candidates, grassroots activists, taxpayers, voters...

We need this conversation. The proposals for higher taxes keep raining down on us like broken promises from Congress. There is the battle against a sales-tax hike in Campbell County; I hear of tax hikes being proposed in Teton County; and now the Wyoming Association of Municipalities (WAM) is piling on:
Wyoming’s unique tax structure means most government services have long been paid for by energy companies. But since taxes on extractive industries go directly to the state government, local governments are heavily reliant on the Legislature to give them a piece of the pie. Now cities and towns are looking to the Wyoming Legislature for more autonomy and taxation authority as they anticipate state money to dry up as severance taxes and mineral royalties flatline.
Let me, right here and right now, address this false narrative that a lopsided tax structure means we should somehow raise other taxes to compensate for a revenue shortfall. The WAM argument, a thinly veiled version of this narrative, suggests that we are somehow so unique as a state, with a disproportionate dependency on one tax, that we just have to find new revenue sources. The same argument, I might add, is being used in the Joint Revenue Committee as some sort of argument for tax hikes right, left, up and down. 

Yes, it is true that the severance tax plays a big role in supplying our state government with revenue. According to Census state-revenue data for 2015, 51 percent of all state-tax revenue come from "other taxes", which basically is severance taxes. But it is a myth that we are somehow unique in depending on one tax; anyone suggesting - or even alluding - that other states have a much more evenly spread tax base, needs to take a break, have a beer and watch a ball game. 

If a 51-percent dependency on one tax is a call to raise other taxes, then what should they do in California or Massachusetts, where the income tax pays 54 percent of state government taxes? In New York, the personal income tax is responsible for 56 cents of every state tax revenue dollar; in Virginia it is 58 cents - and in Oregon, the personal income tax provides 69 percent of state tax revenue.

Should all those states raise other taxes, just because the personal income tax pays more of state revenue in those states than severance taxes do here in Wyoming? 

What about sales-tax dependent states? In Tennessee, the general sales tax brings home 52 percent of state tax revenue; in Nevada, 54 percent; Florida, 59 percent; in Texas and Washington, the general sales tax delivers 61 cents of every state tax revenue dollar.

Should all those states "diversify" their tax base and raise other taxes, simply because they depend "too much" on one tax?

Yes, we are too dependent on one tax here in Wyoming, but let us not forget that this tax is by no means free income to our state. That tax is still paid by Wyomingites: every worker in the minerals industry forfeits some of his earnings so that his employer can deliver severance taxes to the state government. 

Furthermore, our state government's dependency on the severance tax has nothing to do with inadequate revenue from other taxes. It has to do with us spending too much money on too many non-essential government functions. Let us open up our school system to parental choice and educational freedom; let us reform Medicaid and our state's health care system; let us toll the I-80 and make it self-sufficient; let us reform our criminal justice system, run an efficiency and transparency project through our entire government sector and top it off with a constitutional reform that once and forever shuts the door on big, unsustainable government.

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