By Nick Reynolds, Casper Star Tribune, AP
Cheyenne, Wyo. (AP) – A bill introduced in the legislature this week will broach the most controversial subject in Wyoming politics: income taxes.
The bill, sponsored by Democrats Cathy Connolly and Chris Rothfuss, wants to at least begin the discussion of implementing a personal income tax of some sort.
Delivering on one of Connolly’s opening-day promises as House Minority Leader this year, House Bill 233 broaches a Wyoming political pipe dream—a personal income tax—at a time where the Legislature finds itself seeking new and creative ways to raise revenue through what Speaker of the House Steve Harshman, R-Casper, described as a “revenue neutral” broadening of the tax base.
The Republican supermajority has made it clear that a personal income tax is completely off the table—a line it has continually held even in the state’s most dire fiscal times. In fact, Casper Republican Chuck Gray has even introduced a bill to prevent the Legislature from even exploring the topic.
However, Republicans in the House and Senate have sought other means of raising money through what has been marketed as a “modernizing” of the state’s revenue streams, including a targeted tax on large, out-of-state corporations and reintroducing a tax on groceries, a type of tax often criticized as regressive.
Though the Legislature is poised to make some progress this year toward chipping away at the more than $200 million budget shortfall facing the state’s education system, Rothfuss and Connolly released a statement late Wednesday afternoon saying they could do more: starting with a modest income tax on the state’s wealthiest residents.
“Education funding in Wyoming is an ongoing crisis that can be addressed by asking the wealthiest among us to pay a fair tax rate with a single, simple calculation,” they said. “We’re opening a discussion about potential solutions to our budget shortfall, designed to keep our education system funded and continue providing a world-class education to our children.”
The bill will be the fourth item on the House Revenue Committee’s agenda on Friday morning, meaning it might not be discussed until next week. However, the introduction of the bill comes at a time when a greater dialogue about taxation and wealth inequality is taking place nationally, with freshman, socialist lawmakers in Washington and in statehouses across the country advocating for heightened taxes on the nation’s wealthiest: a view aligning with that of a majority of Americans, polls show.
Bill impacts
The key to the Democrats’ bill is its scope: the tax would be modest, at only 4 percent, and would only apply to those with an income of $200,000 or more. However, said Connolly, once the tax credits outlined in the bill are added, that income threshold is closer to the $350,000 to $400,000 range.
With this in mind, though roughly 9,000 tax returns of over $200,000 were filed in Wyoming last year, the bill would impact just over 2,000 of the state’s 264,000 taxpayers, resulting in a combined payoff of more than $200 million in corporate and personal income tax—more than enough to solve the state’s school funding problems.
A targeted tax
Notably, a majority of the people impacted by the bill live in one specific area of the state: Teton County.
After reviewing the measure, Bill Cubin, a GOP consultant and certified public accountant, said that while the bill’s tax rate of 4 percent is on-par, if not lower, than surrounding states like North Dakota and Colorado, the bill does feature an oversight of key industries in Wyoming, particularly oil and natural gas. According to his interpretation of the bill, the legislation as written will only tax people living in Wyoming—not the income an individual living elsewhere earned in the Cowboy State.
The bill would also effectively end Wyoming’s status as a completely safe place for earned dividends from stocks, investments and other passive income, Cubin said.
Whether or not that would have an impact on Wyoming’s economy, however, is unclear.
“Plenty of states around us have an income tax, and they seem to be doing just fine,” he said. “As a matter of fact, a couple of them do better than Wyoming in terms of economic growth. At the same time, this bill just taxes Wyoming residents, and not everyone making money in Wyoming.”
Pushback?
Ultimately, the point of the bill is beginning the conversation about an income tax, said Connolly. In Teton County, where the bill would have the greatest impact, the prospect of examining ways to even income inequality has long been a part of the conversation.
In the race for Wyoming Senate in that part of the state, even Democratic Senator Mike Giereau’s opponent, Kate Mead, suggested a modest income tax could be implemented, citing a Wyoming Education Association survey that said Wyomingites might be willing to pay a modest income tax to pay for the state’s school system.
Connolly, whose proposal for tax reform failed to even get a committee assignment last year, said she was encouraged that the issue would at least be discussed this year. She noted that while members of the Legislature pushed back against the idea of comprehensive reforms, they were often amenable to passing small reforms in order to raise revenue.
“You are stopping the full conversation while you’re sort of piecemealing this,” said Connolly. “I think it’s important we have that conversation.”
