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Sunday, December 3, 2017

Who Needs Democrats in Wyoming...

...when we have Republicans who tax and spend like drunken liberals?

I hope you are sitting down for this. If you have an allergy to tax hikes, please stop reading right here, because what I am about to tell you is even worse than I predicted. I never thought they would go this far, so - yes - I was wrong.  But only on the magnitude of the tax madness we are dealing with.

We'll get to it in a moment. First, the bigger picture. In the Governor's mansion, Matthew Hansen Mead is trying to spend more our money as fast as he can.
Meanwhile, the Republican majority in the Joint Revenue Committee is getting to work on the most liberal tax-policy agenda Wyoming has seen in a very long time. 

Those of you who are seasoned enough to have paid federal income taxes under the presidency of James Earl Carter Jr., will remember that the rates were somewhat higher back then. In 1978, for example, a total of 26 income-tax brackets gradually raised the marginal tax rate from zero on the first $3,200 for married filing jointly, to 70 percent on incomes over $203,200 (in 1978 dollars). 

To make these astronomical tax rates somewhat endurable, the federal government offered a creative list of deductions. You could get a tax deduction for growing tomatoes in your back yard (but not carrots, if I remember correctly) and the overall structure encouraged people to spend lots of money on tax attorneys, accountants and others who could help you reduce your effective tax rate. 

Another deduction allowed taxpayers, under some conditions, to reduce their income tax by whatever they paid in gasoline taxes. 

It is easy to see why these deductions were allowed, and why I am talking about them. I'm trying to delay the bad news... 

Government can only impose punitive taxes if it also gives people the opportunity to not pay those taxes. The problem is that the opportunities are not picked fairly - they are often the result of lobbying efforts by those berated special interests. Without getting into the sleazy relationships that this creates between elected officials and those special interests, let us just note that a tax code full of lobbied exemptions is very bad for economic growth and free enterprise. 

Which, of course, means that our beloved Revenue Committee is considering precisely this kind of tax policy. What else would they be doing, this close to the legislative session?

OK, here comes the bad news. Below is a rundown of the items the committee will be voting on at their meeting Monday and Tuesday, December 4-5, here in Cheyenne. My list includes the "fiscal impact", i.e., itemized tax increase; scroll past the list and you will get the total:

Revenue Diverting or Enhancing Bills [draft number]; impact for FY2019 unless otherwise stated:
--Severance tax distribution revenue [0289 and 0290] 42+88.5=$130.5m
--Leisure and hospitality tax [0198] $8.7m
--Alcoholic liquors markup amount [0145] $2.9m
--Alcohol tax for drug and alcohol programs [0146] $1.4m
--Malt beverage tax [0147] $1.9m
--Tobacco tax [0288]$29.6m (probably FY2019)
--Sales tax on specified services [0142] $82.1m
--Property tax assessment rates [0144] $141.7m (FY 2020)
--Sales tax for school capital construction [0143] $78m 

The total fiscal value of these tax increases is $476.8 million.

Yes, folks. Most of it planned to go into effect at the start of FY2019, which means next summer. And this number does not even include the tax hikes needed to pay for the governor's ENDOW project. He wants $37.5 million right now, just to keep that project rolling. 

If we make the realistic assumption that the governor's ENDOW allowance is an extra expense to the budget, i.e., if we think of it as an ENDOW tax, then the sum total of the tax hikes we are at risk of, suddenly exceeds $514 million.

Half a billion dollars in higher taxes. 

Again, most of it will go into effect in FY 2019. That means July 1 next summer. 

How bad will this be? Well, $514.3 million in tax hikes means approximately $891 in higher taxes for every man, woman and child in Wyoming. Or about $3,560 per year for a family of four. This would impact you and your family directly through higher property taxes and taxes on everything you buy (including a long list of services); and indirectly as your business has to pay higher taxes and will have to cut your hours, deny you a raise or even cut your wage or salary.

This tax package is worse than I thought they were capable of. I had expected something like $350 million, which is bad enough, but not nearly as bad as $477 million.

Or, to be perfectly honest, $514 million. At this point, we might as well consider the ENDOW tax as likely as the long list of taxes already on the Revenue Committee's agenda.

I am not going to beat about the bush. Half a billion dollars in higher taxes is enough to break the back of the Wyoming economy. It is enough to send us into another tailspin like the one we went through from 2015 to the spring of this year. 

For all of you statists out there who will protest and say "well, government spends that money in the other end, so it goes back out in the economy", do consider the fact that these tax hikes are proposed solely to bridge the $400-million deficit in the budget. There won't be a dime's worth of extra spending coming out of these tax hikes. 

I am not even going to gloat at the fact that I predicted a $400-million budget deficit, and that I did it back when the legislative leadership were laughing their heads off behind my back at the very thought of a budget deficit. This is too serious of a subject to be lost to personal gloating.

In fact, we have not even considered the full madness of this. We have the other taxes that the ENDOW project will need in order to get off the ground. The governor wants "tens of millions" of dollars for a workforce training program, and the WyoFlot project will probably run a tab of up to $100 million per year when all factors are included. 

At this point, the scenario is so nightmarish that I really don't want to run a macroeconomic estimate of it. We can no longer rule out a total package of proposed tax increases for FY2019 and FY2020 that, including all ENDOW taxes, crawls up toward $700 million. And I do not even include a Gross Receipts Tax in that number. 

But I will do my macroeconomic analysis. With and without the ENDOW taxes. I will run them and report them in a later article. 

This is not fun anymore. This is statism run amok. It is fiscal recklessness on steroids. A glimpse of the freezing point of the human intellect. The Wyoming economy would barely have been able to carry half-a-billion in higher taxes when it was operating at its highest peak during the minerals rush. Today, with more than 12 percent of the economy gone and 17,000 private-sector jobs lost, half-a-billion dollars in higher taxes is a macroeconomic death wish. 

But wait - there is a cherry on the top of the tax hiker's cake. After having plotted for $477 million in higher taxes, the Revenue Committee is also going to consider the effects of exemptions for favored constituencies. On their agenda for their meeting on Monday and Tuesday are:

--The Effects of Sales and Use Tax Exemption for Coal Gasification and Liquefaction 
--The Effects of Sales and Use Tax Exemption for Qualifying Data Processing Services Centers 
--The Effects of Sales and Use Tax Exemption for Manufacturing Machinery 
--The Effects of Sales and Use Tax Exemption for Repairs to Railroad Rolling Stock

If you are a plumber; if you run an auto repair shop, a book store or a physician's clinic; if you own a couple of taxi cabs; if you are an independent truck driver, a landlord or a franchise owner; you will not get an exemption from sales and use taxes. Then you are expected to soldier on, shouldering the higher taxes that the exempt constituencies will not have to pay.

Again, this is the beauty of higher taxes. Politicians get to dole out exemptions to people who, they think, deserve them. They also get to deny exemptions to others, who the politicians think do not deserve one. 

And while we consider the fact that we were not deserving of an exemption, but are expected to pay higher taxes wherever we go, our governor is revving up the government engine, ready to pour more tax dollars into the tank as soon as he can get his hands on them. 

If the governor and the Revenue Committee get what they want, not even Trump's tax cuts will save us. Even half of the proposed tax hikes will be enough to freeze our economy, possibly tip it into a recession again. And I am fairly certain that if don't get near the $477 million, the Revenue Committee will come back in the 2019 session with a plug-and-play ready Gross Receipts Tax. The net effect will, essentially, be the same. 

Tax, spend, smile. Repeat. Until we hit the half-a-billion dollar iceberg. Or convince the legislature to stop this tax madness once and for all. I hear Senate President Bebout is firmly opposed to tax hikes. The question is, with this strong a pressure for higher taxes, can he hold the line?

2 comments:

  1. No new taxes that is why Campbell County voted down the half penny tax we are tired of the spending and we are not the golden goose!! We must tighten our belts all of us not just the people!! We are tired of big government!!!!

    ReplyDelete
  2. NO NEW TAXES - CUT SPENDING!

    ReplyDelete