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Sunday, February 9, 2020

Tax Alert: Leadership Clears Path for Income Tax

The fight over taxes this session is going to be tougher than it has been thus far. And don't forget: even if the tax bills are defeated this time, history tells us they will rise from the grave as soon as the session is over. Only an unrelenting no from voters and taxpayers will bury the corporate income tax.


Monday February 10, the very day the Session begins, the House and the Senate will vote on a consent list of bills for introduction. 

This is important! Consent lists have been used for Second Reading bills, but as far as I remember never before for introduction. 

The reason why this maneuver is being used is clear. The leadership - think House Speaker Harshman and Senate President Perkins - know that there is a lot of resistance to the corporate income tax. By getting a lot of other bills out of the way they can focus their efforts on convincing enough lawmakers that the corporate income tax really is the way to heavenly peace and prosperity. 

Since the legislature needs a 2/3 vote to introduce bills, there is an inherent threshold of resistance to any bills that are even moderately controversial. As you can see, the corporate income and gas taxes (HB 64 and 63, respectively) are not on the list. They did, however, include HB 75, the Medicaid Expansion bill, which is not uncontested but sacrificeable to the legislative leadership, if they can get the corporate income tax.

All this falls in line with what I have been predicting. To get an income tax passed, you have to do three things:

a) A fiscal emergency. We have been hearing over and over again that our schools are near starvation, with hollow hallways full with dust and broken lights, where kids wander aimlessly, abandoned by evil taxpayers who don't want to pay even more than $17,000 per student. Expect this narrative to shift to another kind of fiscal emergency. More on that in a moment.
b) A distraction. Medicaid Expansion makes for a jolly good distraction, doesn't it? It is a bad bill in itself that could end up costing Wyoming taxpayers more than $139 million per year, but support for this bill among the legislative leadership is not nearly as strong as it is for the corporate income tax. In fact, at a recent event organized by Wyoming Liberty Group, Revenue House Chairman Dan Zwonitzer indicated that his support for Medicaid Expansion is lukewarm. But the bill makes for a great distraction from the big prize, does it not?
c) Alignment of power. Every legislature I have ever worked with has followed largely the same dynamic: the leadership applies a combination of negotiation tactics to get what it wants, from nice to tough. There is nothing special about Wyoming in this case - it is simply how legislation is done. Look at any legislature in the world and you will find the same spectrum being applied.

This last point is crucial, and the use of the consent list suggests a decisive shift in the "negotiation spectrum". At any point where there is a discord between the ambition of the leadership and the sentiment among most legislators, the negotiation tactics tend to lean one way or the other. If the leadership is perceived as weak, or if its agenda is positive in the sense of bringing everyone to the table on a bill generally seen as popular, they will end up in the nice end of the spectrum.

However, when a bill is unpopular and many, perhaps even most legislators oppose it on principle or for fear for losing re-election, the leadership will go entirely in the opposite direction. To go tough, they have to make sure that fence-sitting legislators have as little to negotiate with as possible. They will, simply, get rid of bargaining chips; where normally a legislator could say "yeah, I'll vote for an income tax if you help me on my bill to abolish speed limits", a leadership that goes for the tough tactic will give him no choice. 

The use of a consent list for bill introduction could very well be a method for eliminating bargaining chips as quickly as possible. It is also a way to make legislators who oppose the corporate income tax blow a lot of their negotiation clout on bills like Medicaid Expansion. Every legislator only has so much influence; if you spread it too thin at any given point in time, you will not get a whole lot of things done. With bills on a consent list this early, the leadership forces non-compliant legislators to burn a lot of their gun powder in one big fight: it takes more to get a bill off a consent list than to simply oppose one single bill. 

I would not be surprised to see a consent list being used for second readings as well. That is where it has been applied in the past. This way, the two-thirds threshold is essentially neutralized from a leadership viewpoint but it makes the opposition fight harder without really achieving anything that they would not achieve under normal circumstances. 

Again: the big prize for the legislative leadership is the corporate income tax. That is where they will apply the tough end of the negotiation spectrum.

1 comment:

  1. Thank you for the informative, concise, information and thought provoking article. I'm very concerned with all of the education bills that seemingly grow and grow. Do these people ever walk the halls of schools, substitute teach, look at the budgets of the schools, go to Board Meetings? This corporate tax is not the cure all. It is the first step to personal income tax. I say Balance the Budget. It's a budget session. Put Appropriations and Revenue at the table and the rest of the Senate and House in the gallery behind sound proof glass so EVERYONE knows what the world is going on.