If a blockbuster tax reform proposal from Casper Republican state Rep. Steve Harshman goes the distance, most property taxes in Wyoming would be eliminated in lieu of hiking the state sales tax by 2%.
Harshman is the sponsor of House Bill 203, which would remove all property taxes for an estimated 97% of Wyoming homeowners. In turn, the Wyoming sales tax would increase from 4% to 6%.
He told Cowboy State Daily he considers the legislation as representing the most significant tax reduction in Wyoming history, and a change to a property tax structure that has changed little since the 1800s.
The bill passed the House Revenue Committee on Tuesday 8-1, after Harshman urged the committee not to delay the proposal until the upcoming interim session.
“Our people need this and want this,” he said.
How It Works
The bill exempts $200,000 of the fair market value of the assessment of single-family residential properties for this current tax year. Every year after, $1 million of fair market value would be exempt.
The $1 million exclusion would remove all property taxes for homes valued at $1 million or less.
The additional 2% sales tax collected in return would be transferred to a property tax reduction and replacement account run by the state.
Money from this account would be distributed to county treasurers under the same distribution now used for property taxes, which would be used to reimburse each county and governmental entity from the $460 million in lost property taxes they could expect from the exemption starting in 2025.
“Our golden goose, we’re going to keep it whole,” Harshman said.
To pass his bill, Harshman was able to win over Wyoming Freedom Caucus Republicans.
Rep. Tony Locke, R-Casper, said he supports HB 203 because it allows taxpayers to more easily dictate their total taxes with their purchases.
Some Pushback
Rep. Liz Storer, D-Jackson, was the only member of the committee to vote against HB 203 on Tuesday. Most of the single-family properties in her community of Teton County are valued at more than $1 million.
Storer said she’s concerned about the volatility of sales tax revenue.
In a future recessionary event similar to the beginning of the COVID-19 pandemic, Wyoming’s sales tax revenue would drastically plummet, removing a critical funding source for local governments and education orchestrated by the bill, she said. Replacing money in this scenario would likely have to come out of the state’s savings accounts or by cutting budgets.
Laramie resident and business owner Brett Glass spoke against the bill, saying it will cause younger workers who rent their homes to leave the state because they will not be able to continue to live in Wyoming because of the sales tax increase.
“It could severely hurt small businesses because not only will we not be able to find workers, but our sales are going to be hurt on everything we sell,” he said.
Ashley Harpstreith, executive director of the Wyoming Taxpayers Association, offered a similar take.
“Not only will this affect spending decisions for those investing in million-dollar purchases, but sales tax is regressive and will cause an undue burden on those contemplating buying diapers,” she said.
Harshman said the bill is projected to create a roughly $40 million surplus after its first, which is expected to increase in years thereafter.
Any remaining money after the local government payments are distributed by the Wyoming Department of Revenue, can be accessed as a sales tax refund for anyone who pays both severance taxes and sales or use taxes in Wyoming.
Before its passage, Harshman gave a final plea for the committee to consider the bill after three full meetings spent discussing it. He mentioned how out-of-state visitors pay 10%-15% of Wyoming’s sales tax revenues.
“Don’t get into this complicated thing, it’s an exemption that’s paid for with the sales tax,” Harshman said.
Many expenses in Wyoming are exempt from sales taxes like groceries and rent.
1 Of 13 Tax Bills
Although it provides one of the most aggressive approaches to property tax relief for Wyoming, HB 203 will still face some competition to pass into law as it is one of 15 bills aiming to bring property tax reform still alive in the Legislature.
The bill will next be considered by the full House. If it advances out of there by the next Monday deadline, it will move to the Senate.
Another likely hurdle the bill will likely face is the argument that it unjustly raises local sales taxes. When factoring in local lodging tax rates, some counties like Carbon and Sheridan already charge as much as 13% on hotel and motel rooms.
But Harshman is considering adding an amendment that would reduce the maximum local tax from 3% to 2%, and give local entities a further opportunity to lower their additional local tax to 1% in alignment with the current 7% overall sales tax cap.
Locke and Rep. John Bear, R-Gillette, also recommended rolling in the 5% tax cap brought in House Bill 45 to Harshman’s bill to prevent large future jumps in tax increases.
Storer mentioned the cap approach the House Revenue Committee has been considering to property tax relief as another reason why she voted against HB 203.
How They Voted
Voting for HB 203 were Harshman, Locke and Bear, along with Reps. Andrew Byron, R-Jackson; Ember Oakley, R-Riverton; Tomi Strock, R-Douglas; Dan Zwonitzer, R-Cheyenne; and David Northrup, R-Powell.
Voting against was Storer.
Leo Wolfson can be reached at leo@cowboystatedaily.com.
