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Thursday, April 23, 2020

Pass On CARES Act Money to Taxpayers!

It looks like the CARES Act is going to be a mountainous replenishment of state government coffers. That would be disastrous, both for the U.S. economy in general and for Wyoming in particular. There is a far better alternative.

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It remains to be seen how much money the states will actually get out of the stimulus funds in response to the coronavirus epidemic. The Center for Budget and Policy Priorities has a preliminary estimate for the CARES Act money, but there could be more funds coming. Some states are already hard at work lobbying Congress for more money. 

It also remains to be seen how state legislatures will handle the appropriations of it. That, however, should not be too complicated - there are two very simple guiding principles for our lawmakers to follow:

1. The private sector is in a de facto depression because of government regulations; and
2. While the private sector has been in a mandatory hiatus, government has continued to send out paychecks.

We can discuss the merits per se of doling out supertanker loads of money through the CARES Act and related legislation; as I have explained before, the risks to our national economy are growing rapidly and ominously. That, however, is a discussion for another day. The money is being doled out and the question for state legislators is what to do with it.

Based on the two simple principles above, there is only one thing governors and state legislators can do: pass the funds on to taxpayers. That is the only place where they can be used to avoid an economic recession or depression.

Let us take Wyoming as an example. If the CBPP estimate is correct, the Cowboy State would get $1.25bn through the CARES Act. This is equal to approximately six weeks of total state and local government revenue. To pass this on to taxpayers, all the legislature would have to do is to suspend all taxes, fees and charges by the state government and all local government for a period of six weeks. Ideally, start the new fiscal year with this suspension: do not collect a dime's worth of sales taxes, property taxes, excise taxes, gasoline taxes, lodging taxes, severance taxes, driver's license fees, vehicle registration fees or any other taxes, fees or charges, from July 1, 2020 through August 15, 2020.

Backfill government coffers with the CARES Act funds. This way, we can guarantee that the money will go exactly where it needs to go.

I can already hear the lawyers cry that the state legislature can't do this for all sorts of legal reasons. With all due respect: if the state can force businesses to close under unchecked, non-enumerated emergency powers, it can also close down its own revenue streams for a limited period of time.

In fact, it would not even take a legislative measure to do this. All the governor has to do is declare an emergency - an economic emergency - and order the immediate suspension of collections of taxes, fees and charges by all non-federal government entities in Wyoming.

But we are not done yet. The state of Wyoming has approximately $1.5 billion in its so-called LSRA account. This is effectively its "rainy day" fund, in other words money that has been set aside for extraordinary circumstances. 

These are extraordinary circumstances. It is high time for our legislature to dip into the LSRA funds and use them as intended. To give the Wyoming economy a real shot in the arm as we go back to work, the legislature should extend the aforementioned suspension of taxes, fees and charges to a full two months. By a rough estimate this would require them to withdraw about one third of the LSRA funds.

In the bargain, businesses and families around Wyoming would get a relief from the cost of government for a full two months: July and August.

This is a win-win for everyone. To do this, government would not have to cut its spending by a dime. It would be nice, of course, if the state - including the University of Wyoming - and local governments stopped paying their employees (first responders excluded) for as long as taxpayers are barred from working, but we don't even have to go there to get this stimulus done right. All we need to do is:

a) immediately lift all restrictions on taxpayers, so they can get back to work and start paying taxes again; and
b) compensate taxpayers for these long weeks of economic shutdown by suspending taxes, fees and charges from July 1 to Labor Day.

If the legislature does not pass on the CARES Act funds to taxpayers, or if it starts siphoning off some of the money to state agencies, a lot of taxpayers are going to be very disappointed in August. 

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