Sunday, January 21, 2018

The Gross Receipts Tax Is Coming Closer

With less than a month to go until the budget session starts, it is time for a first look at the bills our legislators have submitted. 

One of those bills is casting an ominous shadow over our state's economic future.

However, before we get to it, let us put our statist legislators in, shall we say, a broader context. Here is a story from the San Francisco Chronicle - the kind of story you just can't make up:
California lawmakers are targeting the expected windfall that companies in the state would see under the federal tax overhaul with a bill that would require businesses to turn over half to the state. A proposed Assembly Constitutional Amendment by Assemblymen Kevin McCarty, D-Sacramento, and Phil Ting, D-San Francisco, would create a tax surcharge on California companies making more than $1 million so that half of their federal tax cut would instead go to programs that benefit low-income and middle-class families. “Trump’s tax reform plan was nothing more than a middle-class tax increase,” Ting said in a statement. “It is unconscionable to force working families to pay the price for tax breaks and loopholes benefiting corporations and wealthy individuals. This bill will help blunt the impact of the federal tax plan on everyday Californians by protecting funding for education, affordable health care, and other core priorities.”
It is reassuring to know that we are not Californa.

Not yet. 

If we don't put the foot down now, who knows where we will be in a few years? After all, a couple of years ago, who would have thought that the Revenue Committee would have proposed almost half-a-billion dollars in higher taxes? Who would have imagined a bill like HB51?

More on that bill in a moment. First, let us take inventory of some smaller, but not unimportant items. 

In all, as of today, there are just over 60 House Bills (three from Judiciary) and 50 Senate Files. The big ones are still missing, such as HB1 (the budget) and the final tax-hike bills from the Revenue Committee. The Appropriations Committee should be done by now, so we can expect a budget on file in not too long. 

As for Revenue, their final meeting before the session is scheduled for January 31, when they will discuss:

  • Leisure and Hospitality Tax
  • Sales Tax on Specified Services
  • Sales Tax for School Capital Construction 
  • Property Tax Revisions and Assessment Rates 

They are also going to revisit "previous business concerning revenue options for taxation of business enterprises and options for further study during the 2018 interim". Long story short: they have not given up on Taxmageddon. It is still very much a real threat, especially since HB51 has the Revenue Committee's blessing.

Before we get there, here are a few smaller but noteworthy bills.

HB19, recognizing virtual currencies, is an interesting bill that could open some interesting perspectives on the future. I am just a bit curious how it works whenever the federal government is involved; to the best of my knowledge, you cannot pay federal taxes with bitcoins or other virtual currencies. So long as you can't do that, the transactional value of a virtual currency is more limited than people tend to think. 

This is not a criticism of HB19; in fact, I like the bill. I just think the sponsors should take a look at the practical potential of the bill. Is it, for example, possible to allow the state of Wyoming and local governments in our state to accept tax payments in virtual currency? I am not sure this is a good idea, but it might be worth exploring. Theoretically, this would create more liquidity in the market for a virtual currency; market liquidity is essential to the long-term stability of any financial market and product.

On a different note, there are a couple of bills dealing with school funding. HB30 makes some general adjustments to school funding while HB32 revises formulas for maintenance funding. HB33 adds some clarifications on the same topic.

On the tax front, HB43 is the raise-the-tobacco-tax bill and HB44 increases the state's share from liquor sales. SF48, while technically not a bill to raise any tax, transfers funds "from the 4 one percent severance tax account to the budget reserve 5 account".

In previous articles, I have explained the magnitude of the Revenue Committee's tax package. I won't go back and reiterate the details - at least not now - but let me repeat the bottom line: if they get everything they want, it is going to choke our state's economy to death. 

As if to really drive home my point, the Revenue Committee has sent HB51 to the session:
AN ACT relating to business entity records and reports; requiring specified business entities to report information to the secretary of state; providing rulemaking authority; requiring reporting; and providing for effective dates.
Yes, folks, the set-up for a Gross Receipts Tax. If this bill goes through, you can rest assure that the big spenders will work as hard as they can to get the Gross Receipts Tax on the books - after November's election. See, the GRT reporting requirement, as mandated by HB51, will not go into effect until July 1, 2019, one year later than what its backers on the Revenue Committee originally wanted. This way, when you go to vote in November you will feel as though nothing has changed, and vote them all back in office again. 

Make no mistake, though: once the GRT reporting requirement is on the books, it is only a matter of time before we get the Gross Receipts Tax itself. If HB51 passes, all businesses should expect to have to pay the tax starting a year after the tax reporting requirement takes effect. 

Since the Gross Receipts Tax is an income tax on businesses, its impact on the Wyoming economy will be of the same magnitude and quality. Therefore, it is absolutely essential that every one of our legislators come clean - right here, right now - and let us know:

Dear Members of the Wyoming Legislature
Do you support, or oppose, HB51?

Some of them have already declared their opposition to any tax hike. For example, I think I can safely put Representative Salazar in the "No" column. Still, the closer we get to the session, the more important it is that we take inventory. 

But that is not all. It is safe to say that if the legislature decides to send HB51 on to the governor for his signature, he will most certainly sign it. This means, in turn, that it will be up to our next governor to decide whether or not he or she will sign an actual Gross Receipts Tax into law. 

Therefore, let us not beat about the bush on this one:

Dear 2018 Candidates for Governor of Wyoming
Do you support, or oppose, a Gross Receipts Tax on Wyoming businesses?

We the voters should not sit around and wait. We should not let this question fall to the wayside. We are the ones who have to be vigilant, hold our elected officials, and candidates, accountable. We are the ones who have to send these questions to them - and demand answers. 

We, only we, can save our state from Taxmageddon. 

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