Reduce services or increase taxes - April 2015
With the close of the legislative session on March 6th, we now will spend time reviewing bills that were passed and will become law.
There will be several interim meetings with the joint standing committees prior to the next session. Since next year is a budget session any bill not pertaining to the budget will need to get a 2/3 vote in order to be considered. It will be interesting to see what happens to the mineral prices the state government relies on to fund the State’s budget. Some of the prognostications I've heard don't seem too optimistic about a rebound in prices for coal, oil and natural gas to pre-2015 levels.
Will Wyoming have to start considering what level of government citizens need in light of decreased mineral revenue, or will the citizens demand state government maintain the level of services and look to tax increases to support those services? Of course in order to avoid tough decisions the various savings accounts that were established will begin to be raided in earnest in hopes those will tide everything over until the next boom in state revenues. How long the mineral downturn lasts will dictate the conversation on increased taxes. In addition to increased taxes, fees and other items will undoubtedly be scrutinized as a small step. If the downturn goes on very long, cuts in state services or increases in taxes will have to happen. The first step in tax increases will probably be a look at exemptions. Any time one looks at exemptions the tendency will be to try and pick off any low hanging fruit, which in this case will be exemptions to entities who may not have a lot of political power or are not very well organized.
Tax increases have never been popular in Wyoming; or in any state I suspect. Wyoming's tiered property tax system which puts minerals at 100 percent; industrial property at 11.5 percent and all others, including agriculture, at 9.5 percent could of course be changed by the Legislature.
Sales taxes are another avenue to raise revenues. The Legislature several years ago dropped the sales tax on food product, but this could be re-instated and of course other sales tax exemptions could be removed. The statewide sales tax percentage could be increased and the Legislature could also increase the amounts local governments can charge as well. Mill levies are another source of income that could also be increased, but most of them would require amending the Constitution.
The one tax Wyoming doesn't have is an income tax and if the Legislature would like to see implementation of such a revenue source, they would also have to consider amending Article 15 Section 18 of the Constitution which provides for a credit for sales, use, and ad valorem taxes against an income tax.
The other avenue open is to start reducing services. Education and health services are the areas which have significant expenditures and Wyoming's Constitution requires that education be funded ahead of other services, so cutting education will be a difficult process without looking at amending the Constitution. Health services is a contentious area as well. During this session one of the big items discussed was whether to increase Medicaid payments based on money which could come in from the Federal Government.
This debate pointed to another source of income which generally seems to be a “silent” source, which is money from the Federal Government. This source, in the recent past has been shown to be an unreliable source, but still funds some significant departments within State government. When times get lean for state government the tendency to take money from the feds increases and people who were once against taking these dollars will look the other way rather than raising taxes to pay for the services.
However this shakes out, the past has taught us that lean times make people look a lot closer at government services to see which ones don't need the funding level they've had in the past and which ones are essential to our well-being. On the federal level it continues to be a ‘get mine while I can philosophy’ while at the state level these debates are a lot more personal.
By Ken Hamilton, Wyoming Farm Bureau Federation Executive Vice President