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Thursday, December 12, 2019

Tax Base Shrinking in Most Wyoming Counties

Most of the legislators on the Joint Revenue Committee represent counties where the tax base has decreased in the past ten years. Yet a majority on the committee wants to raise taxes, and create a corporate income tax. Where do they find the money that will pay those new and higher taxes?


Back on December 2, I noted that Revenue Committee Co-Chairman Dan Zwonitzer is perfectly willing to raise taxes on an economy that is bleeding jobs. This statement of his is not to be taken lightly - quite the contrary: it means that the chairman, and very likely the majority on the Revenue Committee, would sacrifice your business and the financial future of your family, in order to rake in more money for government. 

I would very much like to know where the rest of the Revenue Committee stand on this issue. While we await their answers, let us take a look at the latest county-level economic data from the Bureau of Economic Analysis. These numbers tell us a great deal about what the tax base looks like where you live - and what economic reality Wyoming taxpayers live in.

The BEA has just released the 2018 data for county-level Gross Domestic Product (GDP). This is the most comprehensive measurement we have of economic activity, allowing us to get a good picture of the total value of:

  • Spending by businesses, households and government;
  • Value added by businesses; and
  • Income earned from all sources.

If we isolate the private sector, in other words exclude tax-paid economic activity, we get a picture of the actual, and broadest possible tax base available. 

Here are the private-sector GDP numbers for 2018:

Table 1

County GDP in 2018
Albany        1,062,168,000
Big Horn           399,532,000
Campbell        5,606,893,000
Carbon        1,114,124,000
Converse        1,288,816,000
Crook           271,712,000
Fremont        1,206,460,000
Goshen           495,906,000
Hot Springs           200,568,000
Johnson           306,848,000
Laramie        4,034,391,000
Lincoln           647,819,000
Natrona        5,157,113,000
Niobrara             95,607,000
Park        1,144,504,000
Platte           499,969,000
Sheridan        1,058,080,000
Sublette        1,152,149,000
Sweetwater        3,505,457,000
Teton        2,235,624,000
Uinta           776,919,000
Washakie           310,776,000
Weston           254,038,000

Now: in economic policy it is quintessential to not stare one self blind at one-year numbers. They provide nice reference points, but that is about it. To really understand the health of an economy we need to see its performance over time. 

This is the point where things start going awry for the tax hikers. I have explained elsewhere that over the past ten years Wyoming has had the worst economic-growth record of all states. In 2018 our economy had only kept 91 cents of every dollar it produced in 2008. This nine-percent decline (in real terms) is painfully visible in the BEA county-level GDP numbers. First, let us look at the inflation-adjusted growth numbers, comparing 2018 to, respectively, 2008 and 2013. The grey-marked numbers represent a decline, showing how many cents remain in 2018 of the economic activity in that county in 2008. For example, in 2018 Campbell County had 76 cents left of every $1 of economic activity in 2008; the same comparison vs. 2013 was 86 cents:

Table 2a

Last ten Last five
Albany 1.18 1.09
Big Horn 0.95 0.92
Campbell 0.76 0.86
Carbon 0.51 1.17
Converse 1.57 1.24
Crook 1.20 1.09
Fremont 0.87 0.91
Goshen 1.38 1.25
Hot Springs 1.11 1.04
Johnson 0.40 0.77
Laramie 0.96 1.08
Lincoln 0.87 1.16
Natrona 1.15 0.96
Niobrara 1.61 1.12
Park 1.03 0.99
Platte 1.07 0.98
Sheridan 0.83 1.05
Sublette 0.52 1.05
Sweetwater 0.82 0.93
Teton 1.18 1.19
Uinta 0.69 0.94
Washakie 0.90 0.94
Weston 0.58 1.11

In other words, in 2018 more than half of our state's counties - thirteen to be exact - had less economic activity, adjusted for inflation, than in 2008. Ten counties even lagged behind their own economy from 2013.

Real, inflation-adjusted numbers tell us how actual economic activity evolves. Inflation can disguise economic trouble, giving us the impression of a well-performing economy. Real numbers tell us, so to speak, how many cars are being sold, how many hours people work, how many new homes are being constructed and how many truck loads of produce are being shipped. 

The problem is that taxes are not paid out of inflation-adjusted incomes. It is paid out of current-price economic activity. When politicians look for taxpayers and their money for more to tax, they look at numbers that include inflation. Therefore, let us take a look at the same numbers are in Table 2a, but with inflation included. These numbers give us a picture of what the actual tax base looks like, and how it has evolved over the past five or ten years:

Table 2b

Last ten Last five
Albany 1.39 1.18
Big Horn 0.98 0.91
Campbell 0.81 0.84
Carbon 0.53 1.14
Converse 1.60 1.17
Crook 1.24 1.12
Fremont 0.78 0.88
Goshen 1.53 1.17
Hot Springs 0.94 0.97
Johnson 0.25 0.63
Laramie 1.14 1.15
Lincoln 0.77 1.12
Natrona 1.31 1.02
Niobrara 1.43 1.01
Park 1.04 1.02
Platte 1.26 1.02
Sheridan 0.90 1.13
Sublette 0.26 0.71
Sweetwater 0.83 0.92
Teton 1.46 1.36
Uinta 0.62 0.91
Washakie 0.98 0.96
Weston 0.64 1.12

Again, we have 13 counties that are on the losing side. In all counties with grey-marked numbers, the total tax base was smaller in 2018 than it was in 2008. In nine counties it was smaller than it was in 2013.

No tax hikes are good, but if we have to choose where to start the fight against tax hikes, it must be in a county that is losing economic activity. When the long-term trend is negative, it means that the ability of taxpayers to even keep up with existing taxes is slowly deteriorating. 

It is worth noting that many of the members of the Revenue Committee represent counties that have suffered considerably in the past ten years. Here is a list (not taking into account how the committee members vote on tax bills):

Chairman Cale Case - Fremont. His county has lost 22 percent of its tax base since 2008.
Fred Baldwin - Lincoln, Sublette, Sweetwater, Uinta. All the counties included in his senate district have lost tax base since 2008.
Bo Biteman - Sheridan. Ten percent of the tax base gone since 2008.
Ogden Driskill - Crook, Campbell, Weston. Only Crook has seen growth in its tax base; Campbell has lost 19 percent in the past ten years and Weston has seen 34 percent of its tax base be wiped out.
Affie Ellis - Laramie. Her county has grown its tax base by 14 percent.

Chairman Dan Zwonitzer - Laramie. Same as for Senator Ellis: an increase by 14 percent.
Jim Blackburn - Laramie. Ditto.
Cathy Connolly - Albany. Growth by 13 percent.
JoAnn Dayton-Selman - Sweetwater. A 17-percent loss in the tax base.
Tim Hallinan - Campbell. A tax-base decline of 19 percent.
Dan Laursen - Fremont. Twenty-two cents of every dollar in tax base in 2008 has been lost.
Jim Roscoe - Lincoln, Sublette, Teton. Lincoln County only has 77 cents left of its 2008 tax base. Sublette was economically wiped out: in 2018 only 26 cents remained of its 2008 tax base (a loss of 74 percent - how much of that county will be left under a corporate income tax or higher property or sales taxes?). As for Teton, it has seen steady and solid economic growth over the past ten years.
Pat Sweeney - Natrona. Sweeney's home county has been able to recover and then grow its tax base.
Cyrus Western - Sheridan. A ten-percent smaller tax base (90 cents to the dollar left) compared to 2008.

It would be interesting to know where the pro-tax members on the committee expect to find the source of new tax revenue in their own counties.

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