Wyoming does not need to diversify its economy, but instead should change its spending habits to more closely match spending to available income, according to a noted economist.
Art Laffer, speaking in Cheyenne on Thursday, said he sees no need for the state to use its resources to move away from its dependence on the mineral industry.
“Specialization is a wonderful thing to do,” he said. “You just need to learn how to balance your spending out with your revenue swings.”
Laffer, who served as a member of former President Ronald Reagan’s Economic Policy Board, is the creator of the “Laffer Curve,” an illustration of the idea that excessive taxes actually reduce the amount of money they generate.
Speaking during a legislative reception hosted by “Freedom Path 307,” Laffer was asked whether the state needs to work harder to separate its economy from oil, gas, coal and other minerals because of the associated swings in the economy that occur with variations in prices paid for the commodities.
The state has a good source of income from its minerals, it just needs to allocate its resources better to adjust its spending to its income, said Laffer, who was awarded the Presidential Medal of Freedom by former President Donald Trump.
“You have this huge volatile income,” he said. “But you know, a lot of states don’t have any income from their severance taxes. What you just need to do is learn how to use it and stretch it out and not go for the gold every time the the dollar comes in. And that’s something that requires wisdom and good leadership and good governments.”
While a diversified economy is not a bad thing to have, it is not worth using state resources to achieve, Laffer said.
“It’s not something you would subsidize or spend resources trying to get,” he said.
The state should also avoid the temptation of providing incentives in an attempt to lure new companies, Laffer said.
“You don’t want to bring in industries here just to be diverse,” he said. “With zero taxes here, corporate and personal, you’re going to get industries coming in here. You shouldn’t … pay people to move in. They get a great deal to move here to Wyoming, they don’t need any tax breaks in addition to that.”
Laffer also warned state officials against adopting an income tax, noting his studies have shown 11 states that have adopted income taxes since 1961 have actually seen declines in tax revenues and the quality of public services.
“You have some advantages here in the state that are incredible,” he said. “No income tax, no corporate (tax). Don’t do it.”
“There is no upside to introducing these kinds of anti-growth policies,” he added.
Laffer also said that while he is not impressed with the economic policies of the administration of President Joe Biden, he is optimistic for the future because generally, presidents who support higher taxes are followed by presidents who do not.
“We have a period that is very depressing,” he said. “Don’t believe that it’s over. We’re just in a transformation, a metamorphosis.”
Laffer also commented on Russia’s invasion of the Ukraine this week, saying it was the result of “very weak and indecisive” national leadership.
However, the situation may lead the country’s citizens to recognize the threats facing the United States, he said.
“I think for the first time … in a long time, the U.S. is waking up to what the problem is,” he said.
According to its website, Freedom Path 307 is a group advocating for conservative fiscal solutions to the state’s economic challenges and conservative fiscal policies. Its board members include several former legislators and business leaders such as Wayne Hughes Jr., the owner of Cowboy State Daily.