Sales taxes, investment income, oil severance taxes and federal mineral royalties are proving to be the saving grace for state coffers, according to a recent report, but the overall revenue picture for Wyoming remains bleak.
In the first six months of the year, production of natural gas and coal – as well as prices for coal – came in below the state’s official forecast, according to the Census Revenue Estimating Group, made up of revenue experts from the legislative and executive branches of Wyoming government.
CREG recently released a six-month revenue update for Wyoming, and compared those revenues against its previous official state forecast, released in January.
At one time, coal and natural gas were counter-cyclical – when one was down, the other was up – which helped Wyoming absorb the booms and busts of a natural resource economy, and money continued to flow to keep state government running.
But the July 31 CREG update underscored a new reality: Production of both commodities was down, and the income for two accounts that fund most day-to-day operations in state government would have also missed estimates had it not been for other forms of revenue.
Revenue receipts to the General Fund, which is something of a state checking account, were $201 million or 16.9 percent ahead of earlier forecasts for the year due to higher-than-anticipated sales tax, investment and oil severance tax income.
Receipts to the Budget Reserve Fund, which is akin to a state overdraft account, were 6.7 percent ahead of projections, thanks to severance taxes and federal mineral royalties. State Rep. Dan Zwonitzer, R-Cheyenne, said that Wyoming can’t always count on high returns on investments.
“Future projections for investment returns are nowhere near where they’ve been the last four years,” he said. “They’re looking at 5.5 percent, 5.25 percent (rate of return) for the retirement system. We have some serious problems ahead of us.”
Zwonitzer is a co-chair of the Legislature’s Joint Revenue Committee, which is studying whether to implement new taxes, such as a corporate income tax or a gross receipts tax.
The difference between the two? A corporate income tax is assessed on business profits, or income. Gross receipts taxes are levied on sales.
Companies don’t pay corporate income taxes if their profits are zero or negative. But that’s not true with gross receipts taxes, according to the conservative Tax Foundation.
Forty-four states have a corporate income tax and four have a gross receipts tax, Zwonitzer said.
Other taxes under consideration:
- A higher assessment against wind power generation
- An increase of the statewide mill levy for schools
- Increases for some property taxes
- Adding a fourth category of property taxes – currently there are residential, commercial and industrial – which would consider multi-million dollar residential homes. “That would require a constitutional amendment,” Zwonitzer said.
However, tax talk is tough in the Cowboy State, where people are conservative and used to one of the nation’s lowest tax rates. Previous tax proposals – such as requiring taxes be assessed on services including haircuts, real estate transactions and legal services – went nowhere.
“Some in the Republican caucus say we need to be cutting services more before raising taxes,” Zwonitzer said. “They can’t identify where those cuts are” outside of education.
Revenue bills must first be introduced in the House, where Zwonitzer said many proposals will likely gain the two-thirds vote necessary to clear introduction and be referred to a committee on budget years, such as the 2020 session.
“I think we’re going to have some good discussions,” he said.
