Rush Limbaugh once said, “We are one election away from the kind of dangerous rhetoric and behavior we saw last night – tyranny – taking over this country.”
The corollary to that statement, and feel free to quote me on this one, is we are one election away from bankruptcy.
That is, if the current push to eliminate property taxes keeps escalating.
Wyoming’s tax system is designed so that Wyoming taxpayers do not pay the bulk of the taxes used to support the state. People from out-of-state pay our taxes.
For every $1 paid in taxes, a family of three with a $65,000 income and a $270,000 home receives about $7.50 in public services, according to the Wyoming Legislative Service Office.
The federal government pays about 20% of Wyoming’s budget. I detailed this federal dependence in a January column.
Consider these basic facts about Wyoming’s property tax system.
This first fact is important: mineral companies extracting Wyoming’s minerals pay just under 50% of our property taxes (about $1 billion dollars).
Other sectors contribute roughly the following shares of property taxes based upon assessed values, depending upon the year: residential property (32%), industrial property (13%), commercial property (7%), and agriculture property (1%).
Minerals are taxed at 100%. Industrial property is taxed at 11.5%. All other property, including residential property is taxed at 9.5%.
Mineral companies pass the tax burden on to people who use our minerals – people from out-of-state who consume our products.
If we shift away from ad valorem (property taxes) from mineral companies, to a consumption tax like a sales tax, guess what? Suddenly, all those out-of-state consumers who are currently paying 50% of our property taxes do not have to pay taxes anymore.
The folks of Wyoming get a tax INCREASE of $1 billion, or $1700 for every man, woman and child in the state.
So instead of having consumers from other states pay our taxes for us, we shift the taxes to ourselves -- unnecessarily skyrocketing our own tax burden.
In fairness, we won’t pay the full burden of a sales tax.
Fifteen percent of our sales tax in Wyoming is paid by out-of-state people and mining contributes 10%. We’ll just pick up the other 75%.
Sales taxes will have to increase, up to an estimated astonishing 14%.
If the new sales tax does not raise enough money, get ready for a state income tax. Like it or not, Wyoming has bills to pay.
So, the ready, shoot, aim approach to taxation will effectively increase Wyomingites’ taxes.
The situation gets even more complex. Wyoming receives tens of millions of dollars from the federal government as payment in lieu of taxes (PILT).
Since the federal government is not obligated to pay taxes on the property it owns, out of fairness, the federal government makes PILT payments. In fact, offsetting local property taxes due to the existence of nontaxable Federal lands within their boundaries is the stated purpose of the PILT program.
If Wyoming does not have property taxes, those PILT payments could vanish.
So, the end game of this crazy “eliminate the property tax” scheme is, we won’t tax people from out-of-state anymore. The federal government may not make PILT payments anymore. And the tax burden of the taxpayers of Wyoming explodes from what people pay in property tax now.
Rep. Steve Harshman, R-Casper, has offered a proposal that does not eliminate property taxes but creates a sales tax that pays the property tax for all residential properties up to the first million dollars of value. This proposal avoids all these problems – but the Freedom Caucus killed it.
The burden on the consumption tax essentially hits the lower and middle classes harder, because rich people can only consume so much.
What legislator in their right mind would propose such a crazy scheme? Oh, I know, the current revenue committee on an 8-3 vote, because understanding our tax system is just “too hard.”
It’s hard to govern by slogans.
We need a legislature that will dig down deep, understand the effect of our taxes, and figure out how to keep them low. We don’t need knee-jerk uninformed reactions from legislators who are too lazy to figure the system out.
We deserve better.
Tom Lubnau served in the Wyoming Legislature from 2004 - 2015 and is a former Speaker of the House. He can be reached at: YourInputAppreciated@gmail.com
