A radical tax reform proposal passed by a Wyoming legislative panel Tuesday could hurt the competitiveness of some of Wyoming’s legacy energy companies who already feel burdened by federal policies on clean air restrictions.
The proposal, if turned into law, would exempt up to $1 million of single-family properties in exchange for boosting Wyoming’s sales tax by 2%.
The state’s legacy extraction industries say that could add further expenses to the balance sheets of businesses that already contribute hefty severance taxes to mine minerals from the ground.
Roughly 60% of the money paid annually into the state’s general fund comes from the energy sector. The money pays for everything from K-12 education and fire departments to hospitals and recreation districts.
“If they rob Peter to pay Paul, and exempt property owners with the tax base, this will be a direct hit to industry, which is why we’ve come out swinging,” said Ashley Harpstreith, executive director of the Wyoming Taxpayers Association.
“It’ll impact everyone from buying diapers to (heavy-duty mining) haul trucks,” Harpstreith told Cowboy State Daily.
There Is A Credit For Energy
The bill offered up by Rep. Steve Harshman, R-Casper, which was approved by the House Revenue Committee on Tuesday, radically changes how taxes are imposed in the state.
Harshman’s legislation would remove all property taxes for an estimated 97% of Wyoming homeowners with the sales tax increasing to 6% from 4%.
As a carve out to appease the coal and oil and gas industries, the legislation – House Bill 203 – would provide a refund or credit to individual energy companies to help offset losses siphoned off of their balance sheets on the sales tax side.
“This is bold and interesting proposal, and we do have concerns,” said Travis Deti, executive director of the Wyoming Mining Association.
“From the industry perspective, we appreciate efforts to lower the impacts of the higher sales tax rate with a rebate. But there will be short-term cash flow issues while waiting for reimbursement,” Deti told Cowboy State Daily. “Among other things, we have concerns that the bump in sales taxes for vendors will be passed along to miners, driving up operating costs in a very tough regulatory and market environment.”
Maybe Wait
A higher sales tax would affect every mineral-related industry in Wyoming, including coal, bentonite, rare earths, trona and uranium.
“This would impact competitiveness in all of our sectors,” Deti said. “Potential impacts of the bill on the mining industry could be significant, and we believe a little more time should be spent on the bill in the interim.”
The interim is a reference to the period between the end of the current budget session and the beginning of the next legislative session scheduled to begin in January 2025.
As an example of the proposal’s potential impact on the coal industry, Deti mentioned an unidentified coal operator in the coal-rich Powder River Basin wanting to buy five haul trucks for its mining operations at $7 million each.
“When you talk about the initial outlay [by the operator], and then waiting for the refund, as the bill is written, it’s assuming [the state has] the money for the refund,” he explained.
Fluctuations in the economy could shape how much sales tax money is collected for the state’s financial coffers.
Today’s sales tax on that $35 million worth of trucks is about $1.4 million, but the proposed 6% sales tax formula would bump the total to $2.1 million.
“That doesn’t sound like much, but you’re talking about a million here and a million there,” Deti said. “You’re talking about real money, but waiting for that rebated money, meanwhile, the coal operators don’t get paid until the coal gets to the power plant.”
A Lot Of Unknowns
Payment of the refund could also become slowed for other reasons.
“We’re still dealing with inconsistency of train service, and if you put out an outlay for new trucks and not getting paid on time, the immediate burden of having to shell that out is pretty tough,” Deti said.
Other stakeholders said they are evaluating the proposal.
“While it could certainly affect state mineral revenues, how industry would respond to this change is not clear,” a spokesman for the governor’s office said.
“We are still looking into the impacts the bill would have,” a spokesman with the Petroleum Association of Wyoming said.
Pat Maio can be reached at pat@cowboystatedaily.com.
