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Monday, March 2, 2020

HB47: More Taxes, Less Accountability

Do you want to pay more taxes and have less control over how they are spent? Then HB47 is just the right bill for you.

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The Senate Revenue Committee has approved HB47 by a 3-2 vote. It is now on General File. In a big, first-page article the Wyoming Tribune Eagle (Friday Feb. 28) celebrates the progress of the bill:
Lawmakers moved one step closer Thursday to passing a bill that would give more flexibility to cities to generate their own revenue and allow voters to decide whether to make the county-level fifth-penny sales tax permanent. 
This is a nice spin. In reality, this bill puts a big chunk of real estate between voters and the jurisdiction over the sales tax. It also pushes the local sales tax up yet another notch, effectively increasing the local sales tax to six cents.

The first step to distance voters from the right to determine their own taxation comes already in the first section of HB47, where the bill proposes to lower the threshold for raising the tax within a county. Currently, it takes two thirds of all "incorporated municipalities" (to use the precise legal term) to raise the tax; that threshold would be lowered to 50 percent.

Next, the bill proposes that once half of the municipalities have put the tax hike on the ballot, they can extend its duration from two to four years.

Higher taxes will be easier to impose, for a longer period of time.

Then we get to subsection F under "Imposition" (new text in italic):
the tax authorized ... may be continued by an election of by a resolution as provided in this subparagraph. For the tax to be continued by an election, the county commissioners, with the concurrence of the governing bodies of fifty percent (50%) of the municipalities, shall submit a proposition to the voters establishing the term of the tax as permanent. 
In other words, voters are granted the right to completely surrender their jurisdiction over the fifth penny by making it permanent. 

The bill also opens for a sixth penny on the local sales tax, basically the re-creation of the current penny on top of the one that under this bill can be made permanent. 

Where does this end? How many more pennies are we going to add? In 2017 local governments in Wyoming took in $87.2 million from sales taxes. If we max out the tax increase under HB47, assuming that the fifth penny is already a reality and adding a sixth penny on top of that, under a static formula this would raise another $17.4 million. 

This is money that would leave the pockets of Wyoming families and not give them anything new in the form of government services. All that the $17.4 million (which again is the highest-possible revenue number) would do is plug overspending holes in local budgets. In this way, the tax is no different from any other tax we have seen proposed this session - or any of the recent sessions. 

An often-heard argument is that a penny on the sales tax is only a few pizza dinners per year for a regular family. This is a cynical approach to tax policy, suggesting that people should feel guilty for the luxury of eating pizza once in a while. To many families in Wyoming, having pizza once in a while is about as far as indulgence goes.

An average private-sector job outside of minerals pays approximately $38,800 per year. This is an average across both full-time and part-time positions; thanks in part to Obamacare it has become common in the private sector to offer positions below the 30-hour benefits threshold. This keeps compensation down and limits opportunities for low-income families to improve their finances. To them, even a small tax hike like this one will make itself known in their checkbooks.

There is also the problem with the watering-down of voter influence over tax hikes. Not only is it going to be easier for counties to put a sales-tax proposal before voters - the municipality voice is weakened by the shift from 2/3 to 50 percent approval - but the bill also extends the duration of the tax after each vote. It could even become permanent, eliminating voter influence over that part of the sales tax.

It is never a good idea to couple growth in government (which is what a tax hike is) with weaker accountability for that same government. The proper path forward is that when government grows, its accountability to the people it taxes, should actually increase, at least proportionate to the growth in government. By watering down voter influence, HB47 goes against the fundamental values in a constitutional republic: taxes are to be levied only when representation and accountability are on par with the taxation powers. 

2 comments:

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