Recap: Who Pays? The Budget Crisis and the Future of Taxes in Wyoming

August 21, 2020

After decades of relying on mineral extraction to pay for essential government, Wyoming’s long-predicted bust is here, and it’s worse than many leaders anticipated. Now, as COVID-19 deals the state—and the waning fossil fuel industry—an extra blow, Wyoming suddenly finds itself with a $1.5 billion shortfall. 

Senator Cale Case, Representative Dan Zwonitzer, House Minority Floor Leader Representative Cathy Connolly, and Institute on Taxation and Economic Policy senior analyst Aidan Davis joined ESPC’s executive director Chris Merrill on Thursday evening to lay out in stark and candid terms the challenges facing Wyoming as the state grapples with what one panelist called “the worst fiscal crisis in Wyoming’s history.” 

“It’s serious. The Legislature in the next six to nine months really has to take drastic action now to avert bankruptcy or bonding or other things that haven’t been on the table in a hundred years.”

Rep. Dan Zwonitzer, House Revenue Committee Chairman

The predicament isn’t for lack of trimming the fat. Legislators have been cutting the budget for years.

“We are running all government and all education in this state . . . on half the amount of funds we had five years ago,” said Rep. Zwonitzer, who co-chairs with Sen. Case the Joint Revenue Committee. In July Governor Gordon announced a ten percent across-the-board cut to the state’s budget over the next biennium, with the promise of another ten percent cut still to come.

The problem is structural. “We have an expectation of high services,” said Sen. Case, “but individuals don’t pay.”

Aidan Davis, of the Institute on Taxation and Economic Policy, suggested that there’s lots of room for improvement when it comes to Wyoming’s tax structure. 

A Wyoming family earning less than $71,000 pays as much as 9.6% of their income in state and local taxes, while those who earn $500,000 or more pay just 2.5%.

“If you’re not taxing people’s incomes,” she said, “there’s really no way to get around having a system that hits poor and middle-class people harder than families with higher incomes. It’s a defining feature of Wyoming’s tax system.” 

The tax code has depended on mineral extraction–not income tax–to fund essential services. As a result, Wyomingites currently pay $1 for every $9 in public services

“I don’t think most folks recognize what that nine dollars covers,” Rep. Connolly said. “When people talk about cutting, they always just want to cut what don’t already have.”

But it’s not just roads and bridges. It’s foster care. It’s education.

“The average family gets over a quarter million dollars to send their kids to school in the state of Wyoming. That figure right there should be sobering. I don’t think that we recognize well enough what those services are, because it sounds like they’re extras, honestly, and they’re just not.” 

Rep. Zwonitzer said he’s gotten numerous emails from constituents complaining about the closure of their favorite rest areas. “That’s nothing,” he said. “What this state will look like in five years without finding new revenue? Rest areas are nothing.”

And without taxing people’s incomes, there’s also no way around the fact that the state actually accelerates its pace toward insolvency with every new job it creates.

Unfortunately, those on the panel had the sense that our elected officials don’t have the will to address the revenue side of the budget crisis. The race to avert insolvency could include drastic measures like cutting the number of counties or eliminating funding to small communities.

Fortunately, there is grassroots energy around the topic. ESPC is committed to convening more panels, airing more discussions of the tax predicament, and ensuring that this topic is front of mind in 2020 and beyond.

Want to learn more? You can watch the entire hour discussion on YouTube.

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