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Thursday, September 28, 2017

Wyoming The Tax Hike State, Part 1

Between the legislature, Governor Mead, the Wyoming Association of Municipalities and assorted local tax efforts, we as a state could easily be facing half a billion dollars in higher taxes.

Half a billion dollars. 


This number represents a worst-case scenario, and until recently I thought of it as just that - an unlikely outer-rim possibility. However, as we move closer to the 2018 legislative session, this worst-case scenario looks increasingly likely. It is now more probable than any scenario where all tax hikes, state and local, will stop at half that number. 

The debate about tax hikes is not facilitated by the fact that the landscape of proposed, or "expected", increases in taxes is getting cluttered. With that in mind, I am not all that surprised that nobody has done an overview of proposed tax hikes. That in itself is a troubling testimony of lack of political and policy leadership in our state.

Of course, Yours Truly will step in and fill the void. 

It is worth noting, though, that there is a disturbing lack of political leadership on this issue. On the one hand, we have a slowly growing number of legislators who have seen, or are beginning to see, the dangers with raising taxes. Their courage is highly appreciated. On the other hand, we have a legislative leadership that appears to be slowly moving into the statist camp, favoring higher taxes.

expects Wyoming lawmakers to pass a workforce training package worth tens of millions of dollars when they meet this winter. Mead said that while investing in workforce training, which is a key part of his economic diversity initiative, may be a tough sell, it is essential to helping the state’s economy recover and grow. “There is a lot of things that look counterintuitive that will get us where we need,” Mead told a meeting of the Wyoming Community Development Agency Board on Monday in Casper. Mead said in an interview that the while the legislation is still a work in progress he expects it to call for a substantial sum. “It wouldn’t be one million or two million,” he said. “It would be tens of millions.” Mead said it remained unclear how that money would be distributed or where it would come from but that several lawmakers were working on drafting a bill. He declined to name the legislators.
This comes on top of the ENDOW group's state airline plan, a pie in the sky (pardon the pun) that could easily cost Wyoming taxpayers $100 million a year. 

In other words, time to map out what we are looking at in terms of tax hikes at the state and local levels. Today we look at the state tax hikes; tomorrow we add the pursuit of tax increases at the local level.

1. Recalibration of school funding and deficit elimination. This is to "secure education funding", or however the Recalibration and Revenue committees are going to motivate their final request to the legislature. 

The purpose behind these tax hikes is to close the state budget deficit, which has been sold as a deficit in school funding, but the problem is that this deficit is trending in the opposite direction of the amount the Revenue Committee has been considering. A deficit of $400 million in 2019 is more likely than one of $200 million, and by 2021, a deficit of $700 million is more likely than a $400-million deficit. In other words, it is probable, but far from certain, that the Revenue Committee will propose tax hikes in two steps, one at about $200 million now and another $200 million to go into effect no later than the 2020 budget session. 

This time table would raise assorted existing taxes in the first round, and introduce a Gross Receipts Tax (or expanded Gross Products Tax) in the second round. However, if the budget deficit continues to grow, or its growth exceeds what tax hikers expect - a very likely scenario - they will probably speed up the second round of tax hikes and try to jam it through much earlier than by 2020.  

Price tag: $3-$400 million per year

2. Bucking Tax Airlines. Apparently in synchronization with the ENDOW project, the people over at WYDOT are already hard at work piecing together a state airline project. 

This idea, conceived by people with more fantasy than economics training, would mandate 21 flights per day between Denver and Wyoming. It would place in the hands of WYDOT (or some new government administration) the authority to control all commercial aspects of these 21 daily flights, with the explicit purpose to put prices so low that people just can't resist flying. Those prices, and the minimum per-flight capacity that government would dictate, would quickly put this project beyond the realm of commercial viability. The balance, of course, would be passed on to taxpayers.

Price tag: up to $100 million per year (and an unknown amount as investment in airport capacity expansion and other start-up costs)

3. Workforce investment project. As mentioned above, this is Governor Mead's next big project.

We have a system of community colleges around our state that sell themselves - on good merit - as workforce training institutions. These colleges do a good job and could very well survive as private institutions. But leaving that issue aside, it is worth noting that some of our community colleges are on the quest for more money from, or guaranteed by, taxpayers. 

At the same time, Governor Mead is working with an undisclosed number of anonymous legislators in drafting a bill to throw "tens" of millions of more taxpayer dollars after a new workforce training program. Apparently, this effort is working, because one of the legislature's strongest opponents to higher taxes is coming around. The Casper Star Tribune again:
Senate President Eli Bebout, R-Riverton, said that he had participated in discussions with Mead and House Speaker Steve Harshman, R-Casper, and was supportive of approving spending for workforce training. “It’ll have to weigh against our other revenue demands,” Bebout acknowledged. “But we have to take a 30,000-foot view and look from the future and diversification and providing jobs is a huge one.” 
Is this not why we have community colleges?

Sadly, Senator Bebout has apparently decided to join the welfare statists. He seems to be at least partly onboard with the illusion that tax-funded "economic development" - whether as a pie-in-the-sky airline project or workforce training - creates jobs. The problem, which the esteemed senator and the venerable governor both will realize too late, is that when you raise taxes on the community where businesses and jobs are supposed to be created, you pull the rug out from underneath the very feet of those government projects. 

Somewhere, somehow, I am not all that surprised by Senator Bebout's willingness to raise taxes to pay for a new government boondoggle. When I attended the Joint Revenue Committee meeting in Thermopolis, the good senator said that he could see how the legislature could make a Gross Receipts Tax work. His unrelenting opposition to higher taxes from the last legislative session seems to have softened considerably over the summer. 

It is worth noting that neither Governor Mead nor anyone else interviewed in the Tribune article could give an estimate of how much this new workforce training program would cost. However, "tens" of millions probably means...

Price tag: $50 million per year

...because once this program is in place, it will not go away.

As of today, this is pretty much what we can expect in terms of permanently higher state taxes. A sum total of $450-$550 million, probably in increments over two years. Alas, by 2020 a family of four in Wyoming could expect have $3-4,000 less per year, lost directly or indirectly to those higher taxes. 

And we have not even added local tax increases yet. We will do that tomorrow.

6 comments:

  1. Taxes , Lets examine each of these one by one.
    1. Economic development, Job retraining, and general infrastructure modernization. What is the need and benefits of this area of our taxes?
    Well to start let's start with jobs and a workforce to fill them. Where do we get these?
    Do they magically appear? No!
    We have to spend money to diversify and develop the economy to get more money in taxes! We raise the revenue in the private sector by providing a platform from which private businesses can work. We need transportation, skilled workers, and good tax structure.
    Now the mechanics of all that are the questions that we need to address.

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    Replies
    1. No, government does not need to spend money to "diversify and develop" our economy. The idea that government somehow has to be involved in this is so new in our history it is barely a blip on the historic radar. Private entrepreneurship has taken mankind from the stone age to the modern industrialized economy.

      For every dollar government spends on "economic development" it needs to raise taxes here and now. Those taxes make it more costly for businesses to take advantage of whatever "economic development" can provide, making it a self-defeating proposition.

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  2. 2. Malt Beverage tax, why is it when we need money we always look to sin taxes? Raising the tax on a few for the many!
    Guess the idea is why do we only tax thew malt beverages what about the wines, whiskey, sodas, milk, juices, being satirical.
    We do not need to raise this tax, if we do we are only hurting those that are already paying their share and more. I am for Joe 6 pack and not taking more of his money.

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  3. 3. Food Sales tax? Well lets look at that in respect to the general population, now what is more fair than a tax that effects all equally, we know that the average tax is higher in most places around us. The idea of the tax is does not really effect the people that much.

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  4. 4. Lodging Tax? What does it do? Well to start it is used to promote travel in Wyoming, that in turn produces revenue in lodging, food, fuel, and entertainment dollars. Travel is a luxury sometimes and as such this is not so bad a tax. Considering most places have a 10% lodging tax, plus some even have a city tax on top of that, Lodging taxes pay their own way in my estimate.

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  5. 5. General Revenue tax.
    Just plain wrong on so many levels! Income tax at its heart is what this is, once we go down that road we are defeating the other taxes for economic development.
    Because the quality of life is determined by a lot of factors for companies considering moving into an area an high taxes is one which is a negative for them and their workers!
    We do not need a State income tax!!

    ReplyDelete