No easy fix: Lawmakers, public confounded by revenue debate

LANDER — As the revival of king coal becomes more difficult to imagine, discussions of how to replace its critical tax revenue — the industry has long paid many of Wyoming government’s bills —  are growing more prominent, somber and difficult.

The shift was on display at the first meeting of the Joint Revenue Committee since the end of the 2019 legislative session.

Revenue committee hearings of recent years have been marked by repetitive arguments from industry lobbyists against specific taxes. Raising the tax in question, or removing an existing tax exemption, will hurt so-and-so industry by making it less competitive with surrounding states, those arguments go. In contrast, the public testimony last week in Lander was more soul searching, at times even evocative of the tough, heartfelt discussions more common to issues like gun control or abortion.

The change came in part from new Senate Revenue Committee Chairman Cale Case (R-Lander). The Lander Republican and others on his committee pressed lobbyists to think beyond protecting their industries and address the state’s need to move past revenue dependence on fossil fuels.

“I’m very frustrated about attacking each bill individually,” Case said. “We need to have this broader discussion.”

Discussion ranged from calls from education advocates for new funding streams to a desperate plea from a city councilman from Cokeville, a town in economically troubled southwestern Wyoming, against taxes.

The tense discussion and the lack of clear answers reiterated the trouble facing the Legislature — though economists, consultants and leading lawmakers say Wyoming should replace falling mineral revenues before the problem worsens, there remains little political appetite for broad changes to the tax structure. In the last legislative session, lawmakers sought to fill some of the gap with taxes paid primarily by non-residents, instead of their constituents. But even measures like the corporate income tax targeted at out-of-state chains, and a lodging tax targeted at tourists and visitors, ultimately failed.

The corporate income tax bill would have made a significant dent. Conservative estimates had it raising $45 million a year for public education.

As longtime lobbyist and Wyoming political operative David Picard put it, lawmakers have thus far sought to simultaneously pass taxes and duck the political fallout by not targeting voters.

“They’re coming up with unique proposals to do the least amount of political harm to themselves,” he said.

For lawmakers to truly fix the state’s tax structure, they may need to convince the public the cuts they’ve made for years are significant.

“We are not going to have the political stomach to pass a meaningful tax until we’ve satisfied the electorate that our spending is appropriate, efficient and without waste,” Picard said.  

To those lawmakers who feel they’ve made heavy cuts since 2016, that demand seems “amorphous,” as House Revenue Chairman Dan Zwonitzer (R-Cheyenne) put it.

But the lesson may be that there is no easy trail for lawmakers to walk, no tax that can be slipped past the electorate in the quest for revenue to replace that from the struggling coal industry and volatile oil and gas industries. In conservative Wyoming a tax will never be an easy sell, but the nearly unspoken suggestion in Lander was that the changes that right the fiscal ship will require a broader and more fundamental discussion, and reimagining, than the Legislature or public has yet had.

Maybe through that discussion lawmakers can find a tax they can pass.

“Good policy is good politics,” Picard said.

“This has been robust,” Picard said of the discussion in Lander. “It’s necessary. It’s timely.”

Lawmakers took public testimony on a series of tax ideas that have failed repeatedly in recent sessions. They then jettisoned several of the autopsied bills to focus this year’s efforts on property taxes and a corporate income tax targeted at big-box stores and out-of-state restaurant chains.

Threading the needle

At the meeting, Picard, a contract lobbyist, spoke on behalf of the Wyoming Taxpayers Association, along with Bobby Rolston, an employee of oil company Anadarko and chairman of the tax policy group. The group’s board is made up of a number of executives and lobbyists from the energy industry and other major Wyoming industries.

The group judges taxes and chooses whether to support or oppose them based on principles listed on its website, Ralston and Picard told lawmakers. Those principles include a justified need for a tax, and a question of whether “the tax result[s] in diversification in taxation.”

The WTA’s criteria also includes questions about whether the tax imposes “equal and uniform liabilities upon similarly situated taxpayers.” There, Ralston argued, the Legislature had run into problems with its recent efforts to pass taxes that could be more politically expedient because of their minimal impact on state residents, i.e. voters.

“It was too targeted,” Ralston said of the corporate income tax proposal, “And not broad based enough.”

But of a property tax that would have raised taxes across all property holders, he said the group opposed the bill because it further burdened the heavily taxed extractive industry. Of a corporate and personal income tax proposed last year by House Minority Floor Leader Cathy Connolly (D-Laramie) that did not make it out of the gate, he said his group would have had to have a “serious” discussion.

In fact, the only tax move that seemed to have current support from the industry-backed group was the reimposition of a sales tax on groceries. Taxing food purchases is considered a regressive tax that impacts the poor, since buying food is not optional for those in any income bracket. The sales tax on groceries was removed in 2006.

To support this position, Picard cited an often-used statistic: The average Wyoming family of four receives around $30,000 in government services — education, infrastructure, public safety — while paying $3,000 in taxes each year. To fix that imbalance, Picard said, everybody has to have “skin in the game.”

That presents a clear conundrum for legislators. The Legislature faces vocal resistance from adherents to the Wyoming Republican Party’s increasingly rigid anti-tax stance. Party activists and officials opposed even the tax targeted at massive out-of-state corporations — and backed the opposition with the implicit threat that lawmakers who voted for such bills would see primary challengers at their next election.

Such resistance would likely increase in ferocity and draw in more voters if a bill that spread a tax evenly among residents, through a property or income tax for example, gathered momentum.

“That bill would be dead on arrival,” Rep. Tim Hallinan (R-Gillette) told the Taxpayer group’s representatives. Hallinan himself is a staunch conservative lawmaker who has opposed nearly all tax increases and in successive recent years brought a bill to lower the severance tax on coal. But Hallinan voted for the failed corporate income tax last session, which passed the House 44-14 only to see expected support from senators evaporate.

Opponents: Don’t kick us while we’re down

Taylor Allred, a city councilman from Cokeville, offered lawmakers a view from his part of the state. He cited a coal plant and coal mine outside Kemmerer, both under threat of closure, as he described an economically tottering region where residents and local governments alike are feeling the pinch.

A proposed bill to put a sales tax on services — from haircuts to tax accountants to lawyers — would devastate his community, he said, where many people make a living selling services to their neighbors. Local barbers and Allred’s wife, who runs a pre-school, would suffer both from the tax and the burden of complying with the tax, he said.

“You’re cutting the legs out from under them,” he said. Even the lodging tax that was touted as hitting out-of-staters would hurt his neighbors as they travel the state to cheer their children in high school sporting events, he argued. A fuel tax increase would do the same.

“Every time we turn around,” there’s a new tax on the table, he said.

“It’s a big deal,” he said. “You gotta understand. These are people’s lives, they’re not just numbers these are real people.”

Allred wanted to see more scrutiny of education funding, he said. He leveraged several conservative talking points about a lack of accountability in education spending, pointing to spending by Natrona County School District that was published by the transparency website Open the Books.

“Let’s have some transparency,” Allred said.

More cuts? Where?

The Wyoming Taxpayers Association rubric for evaluating proposed taxes also calls for analysis of  government’s stewardship of existing funds. The principle, and claims of inefficiency, were echoed by many, like Allred, who attended the meeting to oppose tax increases.

Travis Deti, executive director of the Wyoming Mining Association, said the mining companies that made up his association (including coal mining companies) opposed any tax increases “until all avenues of efficiencies and cost reductions have been met.”

Support in-depth reporting during WyoFile’s spring fund drive

The mining companies specifically opposed bills to increase property taxes and broaden the sales tax to include services, which Deti said would include professional services like legal counsel and accounting used by the mining industry. Energy companies pay the highest rates of property taxes in the state.

Zwonitzer asked where lawmakers should make more budget reductions “to satisfy this amorphous requirement that we need to cut some more before we raise any money.”

Deti responded with a classic slogan: The Legislature needs to learn to “live within its means.”

The Legislature cut steadily from agencies for several years, and has cut tens of millions from education since 2016. In the summer of 2016, then Gov. Matt Mead made the most significant cuts, with across-the-board reductions of nearly $250 million in one go. At the Appropriations Committee budget hearings agencies now report feeling the pinch of cuts, and in some areas the Legislature has reinstated funding after seeing the impacts.

The Legislature and executive branch continue to seek savings, however, including through a government efficiency effort that several tax opponents called a step in the right direction. But what impact that effort will have, and when, remains to be seen.

On the education funding side, discussions about spending continue, if tensely. Senators in particular continue to express an interest in cutting education funding. Advocates for public education, however, believe the state is already flirting with dropping below funding levels set by the Wyoming Supreme Court in a series of pivotal cases.

Case raised a further worry. Mineral revenues have likely not finished dropping, he said. As other states and nations increasingly take action to stem carbon emissions out of climate change concerns, the future could hold further and larger market shifts away from fossil fuels.

Case’s desire to lead a broad discussion about tax increases may itself be a sign of the reality the state faces. For years, the libertarian senator from Lander was considered by some the archetype of small-government conservatism in the Wyoming Legislature. The Wyoming Liberty Group, of which Case is a board member, for a long time ran a ranking system called the Wyoming Liberty Index, where lawmakers were listed on how their votes aligned with small government principles, including votes against taxes.

The group has since discontinued the Liberty Index and WyoFile was unable to find old versions online. But an entry on the index found on the voter information website Ballotpedia called Case the long-reigning Senate champion: “For as long the index began rating the state Senate, Cale Case [has] earned the top spot,” the site says.

But Case’s pragmatism about the state’s fiscal structure, and his new role as chairman of the Senate Revenue Committee, appear to have led him to a tax discussion.

“[The world] is changing and we’re the committee at this pivot point in this change,” he said at the meeting. “What are we going to do about it?”

Of those who think Wyoming should spend less money on government, Case said in an interview, “they’re right. And I will vote for the cuts. I’m not the one with the problem there.” But if the state doesn’t shift its revenue streams away from fossil fuels, the Legislature could slash budgets to align with current revenue streams only to see those revenue streams drop again.

“What do we do then? Do we cut again?” Case asked, “or are we going to plan for the future?”

Like Case, Deti too acknowledged that coal would no longer pay the bills. “That money’s gone,” he said, referring particularly to large bonus payments coal companies make when they begin a new mine lease.

“You can’t get blood from a turnip,” Deti said.

Despite his position minutes earlier against new taxes, later in his testimony Deti said in Wyoming, “we need to expand our tax base.”

Case asked for clarification. “You’re opposed to new taxes on your members or you oppose new taxes period?” he said.

“In general” the mining companies were opposed to any taxes, Deti responded. “But down the road, with sufficient cuts, perhaps they’d find a way to come around.” Lawmakers continued to press Deti on where he would suggest lawmakers cut, or what taxes the populace might stomach. He didn’t have an answer.

“That’s why I don’t run for office,” Deti said.