CHEYENNE – A study released last week examined the state’s tax structure in the context of local costs of living and average incomes, ultimately finding the state has the capacity to boost its taxes without overburdening its residents in comparison to other states.
The study, which was conducted by the Wyoming Center for Business and Economic Analysis at Laramie County Community College, built on a legislative staff report that compared Wyoming’s tax structure to neighboring states, using the median rates from that group as a capacity threshold. Both reports were conducted in response to the state’s ongoing budget crisis, which has led to deep cuts by Gov. Mark Gordon.
Using those comparisons, as well as other states with similar tax structures, the new study then considers Wyomingites’ ability to afford those tax increases by looking at residents’ household income, hourly wages and cost of living.
For example, Wyoming’s median household income in 2019 was $65,000, while the median among its neighboring states was $63,229. The state’s cost of living is also lower than all but two of seven nearby states – Nebraska and Idaho.
Those factors, combined with the comparatively low rates of taxation in the state, indicate Wyoming has some existing capacity to increase taxes, according to Wyoming Center for Business and Economic Development Director Nick Colsch, who conducted the study alongside LCCC President Joe Schaffer.
“Wyoming incomes are at or above the average for all the comparison groups, so even if the state sales taxes or residential property taxes were to increase, it would lower disposable income in Wyoming, but we don’t think it would make as big of an impact as it would in a lower-income state,” Colsch said.
“Then, of course, we are already being taxed well below our comparison groups, so there’s capacity in the sense that we don’t even have to rise all the way to the median or to the mean (levels),” Colsch continued. “We could get halfway there and be able to shore up the budget.”
If Wyoming were to reach the median rates of sales, property and fuel taxes in the only other four states without any sort of income tax, it would raise roughly $2.4 billion dollars in the 2023-24 biennium, according to the analysis.
The study also looks at two specific states – South Dakota and Nevada – that share some characteristics with Wyoming: no income taxes, strong tourism industries and diverse landscapes. Compared to both states, the study found Wyoming had a higher median household income, a higher median hourly wage and a lower cost of living, all factors suggesting an existing capacity for increased taxes. Adopting the existing tax rates in either of those states would generate roughly $2.2 billion for Wyoming in the 2023-24 biennium, according to the study.
Colsch noted the study provides a broad analysis of the state’s tax structure, but its figures could vary slightly, depending on the effects of implementing certain policies, such as an increase to the state’s sales tax leading to some reduced spending. However, the LCCC instructor was confident in the study’s overarching themes.
“For Wyoming to do nothing would be the wrong choice, in my opinion,” Colsch said. “We don’t have to match South Dakota perfectly. You can match on certain areas and leave certain other areas alone.”
However, it could be an uphill climb to get any revenue-raising measures passed in the Wyoming Legislature, which has rejected a wide range of tax increases in recent years. The Legislature is expected to convene Tuesday before delaying most of its proceedings until later this spring due to the COVID-19 pandemic.
During a Cheyenne Rotary Club meeting last week, Ashley Harpstreith, executive director of the Wyoming Taxpayers Association, told attendees there would likely be some individually sponsored bills focused on the state’s sales tax.
“That seems to be the one that most people have the appetite for,” Hartpstreith said of a sales tax increase. “We’ll start looking at property tax assessment ratios and mill-levy increases, I think, as K-12 (education) cuts come to the table. I don’t see any legislators having big appetites for that until that’s balanced out on the spending side.”
There also appears to be little interest among businesses for the tax proposals currently on the table in Wyoming. A poll conducted last month by the National Federation of Independent Business of its Wyoming membership found 81% of respondents were opposed to imposing a sales tax on exempted services, and 58% of respondents were against an increase to the state’s fuel tax, one of the few revenue proposals that won approval from a legislative committee during the interim.
“Our members are firmly decided on three of the poll questions,” Tony Gagliardi, Wyoming state director for NFIB, said in a statement. “I think what the response to the fuel tax question shows is a willingness to consider a well-thought-out plan for funding highway maintenance and construction, and not simply issuing a blank check for the job.”
The study conducted by Colsch and Schaffer did not consider Wyoming businesses’ capacity to take on additional taxes, though Colsch said the center will conduct additional studies, including one on businesses’ capacity, in the coming months. The study released last week was also provided to local lawmakers, and Colsch said the center’s research is intended to provide policymakers with as much useful information as possible.
“There are options, and that’s kind of what we’re trying to show,” Colsch said. “There are options to fix the budget process.”