Wyoming does not need a corporate income tax. Wyoming needs its own TABOR.
As of today, the fight against tax hikes here in Wyoming has produced mixed results. On the one hand, HB63, the gas tax hike, failed introduction. Furthermore, the Revenue Committee leadership, Senator Cale Case and Representative Dan Zwonitzer, lost the fight to raise the state sales tax to five percent.
On the other hand, the local sales-tax bill has been placed on general file. This tax will diminish voter approval and make it easier for sales-taxing local governments to keep taxes high.
We also don't know yet what is going to happen to HB64, the corporate income tax. I have explained on numerous occasions what a bad tax this is:
- It will not stabilize tax revenue, as some proponents suggest;
- In fact, it will actively destabilize revenue;
- It is a door opener to a personal income tax (which is again being proposed in a separate bill);
- The corporate tax base is actually getting more unstable over time; and
- Wyoming is the only state in the country that is losing jobs and seeing existing paychecks get smaller.
In other words, just the prospect of a corporate income tax has already taken a toll on our state's economy.
In an interview with KGAB AM650 this morning, Americans for Tax Reform President Grover Norquist pointed exactly to this problem. He stressed the long-term damage that a corporate income tax does: businesses may not pack up and leave right away - although some may choose to do so - but when it comes time to deciding where to make the next investment they will prioritize states with a more favorable business climate.
Norquist also explained that you cannot have a conversation about spending reform unless you first, firmly and solidly, say no to tax hikes. As soon as tax hikes are no the table, politicians will water down their spending reforms and spend the extra revenue before they get around to any spending reforms. There is no shortage of examples of this, both nationally - Norquist mentioned the 1982 and 1991 tax increases that Presidents Reagan and Bush Sr agreed to - and here in Wyoming (remember the dime that they added to our gas tax?).
In fact, our state is an even worse example: here, tax hikes are not even paired to a conversation about spending reforms. Our conversation is has not yet caught up to where the national discussion over taxes were in the 1980s.
A great way to start this is to have a serious conversation about a Taxpayers Bill of Rights, TABOR, here in Wyoming. We have a chance to have that conversation in Wyoming. Explains Patrick Gleason, Vice President of State Affairs at Americans for Tax Reform:
A member of the Wyoming Legislature, Representative Chuck Gray (R), introduced a joint resolution last week that seeks to limit the growth of the state budget and require voter consent for the approval of future tax increases. House Joint Resolution 2 ... would amend the state constitution to include a "Taxpayer's Bill of Rights" that would do two things: limit state spending [growth] to the rate of population growth plus inflation, and require all state tax hikes receive voter approval.
This is a good bill that I am happy to say is an even better TABOR than the Colorado version. It prevents a transfer of spending authorities to local governments and it plugs the so-called enterprise loophole in the Colorado bill: the state simply cannot just move spending into "enterprises" and charge a fee instead of a tax.
Representative Gray has done a great job with this bill, especially considering the huge risks we face as a state if we don't change the way our state government taxes and spends. The improvements over the Colorado original will guarantee the protection of taxpayers at an even higher rate than south of the border, something that definitely benefits the Wyoming economy.
There are two steps to these macroeconomic benefits. The first step is the predictability that TABOR provides in terms of taxes and the cost of doing business in a state. Gleason again:
Colorado's TABOR is the reason why Democrats who control the Colorado Legislature and would like to impose a host of tax increases are unable to do so. In November of 2019, Colorado voters affirmed their support for TABOR by rejecting Proposition CC, a measure referred to the ballot by legislative Democrats that would've gutted TABOR by ending the taxpayer refunds due in accordance with it.
He also notes that the Wyoming model "would deposit most surplus revenue in a reserve account" instead of going back to taxpayers. Superficially, this seems like a weakening of the TABOR idea; as Dan Mitchell reports, the Colorado tax refunds have made a clearly noticeable difference in the pocket books for Colorado taxpayers. However, the diversion of most of the refunds into a stabilization account is a reasonable adjustment to the specific nature of the Wyoming economy.
Thanks to at least 20 years of macroeconomic mismanagement by our legislature, our state is far more mono-industrial than it deserves to be. Natural resources, good and necessary as they are, play a far bigger role in our economy than they should. Since this industry is more volatile than other industries, its ups and downs have a disproportionate effect on, especially, our government finances.
Representative Gray has taken this into account in his bill. In the future, when our government is smaller and the cost of government has gone down, and when - as a result - we have seen growth in other industries, we could very well make adjustments to our TABOR to increase the refund share being directed back to taxpayers.
Our legislature would make great progress toward a stronger future for our state, and a much more fiscally sustainable government, if it took Representative Gray's idea seriously. Our elected officials would send a signal that the days of trying to tax Wyoming out of prosperity are over, and that our state will be open for business in the future.