Wyoming has been criticized by some for a perception that the state takes much more from the federal government than it pays because of its low tax rates.
A new report from the Rockefeller Institute says the Cowboy State actually ranks in the top 10 in federal taxes paid per capita.
The study of 2021 federal revenue figures, featured in The Washington Post, finds that Wyoming pays the seventh most taxes per capita to the federal government. It also pays the most taxes per capita of any Republican-majority state at $14,260.
That Wyoming residents would pay the seventh most per capita is also noteworthy because the state also has the second lowest effective tax rate in the nation.
Wyoming also receives only slightly more in return from the federal government at $14,804, the 13th highest return in the country.
Minerals Hauling The Load
Buck McVeigh, former chief of staff for Gov. Mark Gordon and former president of the Wyoming Taxpayers Association, said these numbers align with his knowledge of the state’s income base.
“It’s an interesting dynamic really,” he said. “If we’re going to be doing mineral production on these lands, we’re going to be paying for it as far as royalties.”
McVeigh said the mineral royalties that energy producers pay for mining on federal lands in Wyoming provide significant tax revenue for the U.S. government, making up a lot of ground for the state’s low tax rate.
“With that, oil and gas companies (also) pay an exorbitant bucket to the federal government in mineral royalties,” McVeigh said.
McVeigh said the federal government then remits 50% of these royalties back to the state, which are primarily turned over to local city and county governments.
Jared Walczak, vice president of State Projects for the Washington, D.C.-based Tax Foundation, has worked with state officials in Wyoming before and has a strong understanding of the Cowboy State and national tax landscape.
He said he’s not surprised by the report’s findings.
Walczak points to a small number of wealthy investors and the state’s vast energy production as the primary sources of Wyoming’s high federal payout. Most of these investors live in Teton County, the wealthiest county by per capita income in the nation.
A Few Have A Big Impact
McVeigh said Wyoming’s population, the lowest in the nation, tends to cause the Cowboy State to show up toward the top of the charts in many national financial studies.
The influence of Teton County’s tax contributions can be seen in a few different ways, he said.
According to the data, Wyoming pays the highest federal corporate income taxes per capita in the nation at $1,643. It also pays the highest federal excise taxes per capita at $466.
Walczak said the money a state sends to the federal government usually correlates with its income level and factors closely related to income, such as education or the share of the workforce in management and business jobs.
But Wyoming again is an outlier to this theory, featuring the 25th highest median household income in 2021. Walczak said this also is amplified by Teton County.
Wyoming’s respectable level of income, Walczak said, reduces how much it receives from the federal government because of its lower need for welfare funding.
“The cost of living is relatively high because the welfare is relatively low,” he said.
Breaking The Narrative
Wyoming’s place on the list is one of a few contradictions to The Washington Post’s narrative of the report — that blue states subsidize benefits used by residents of red states.
Nine of the 10 states that paid the most to the federal government, per person, voted for President Joe Biden in 2020. Nine of the 10 states that paid the least voted for former president Donald Trump.
The data analysis finds that eight of the 10 states that get the most money back from the federal government per dollar voted for Trump in 2020. Nine of the 10 states that got the least voted for Biden.
Leo Wolfson can be reached at leo@cowboystatedaily.com.
