Faced with COVID-19 and the collapse of Wyoming’s coal industry, Republican Gov. Mark Gordon said recently that the state might have to start abandoning small towns because there’s not enough money to maintain their sewers and streets.
Sundance, Wyoming, is considering axing its entire police force because they can’t pay for it.
I have a nearby neighbor who’s a die-hard, Trump-loving veteran, and we’ve been going back and forth about the mess Wyoming faces as extractive industries dry up. But then he made a surprising statement: “It’s stupid that we don’t pay state income tax here.”
The Wyoming Legislature passed its first severance tax on mining in 1974, and ever since, our tax system has leaned more and more heavily on coal, oil and gas companies. As a result, generations have come of age in Wyoming with no experience paying state taxes like most of our fellow Americans.
Wyoming is one of nine states without an income tax. Places like Texas and Florida that lack income tax tend to have ultra-high property and sales tax rates instead. Alaska does not, only because it’s likewise dependent on mineral taxes.
Along with having no personal or corporate state income tax, Wyoming also has the third lowest property tax rate in the nation and the sixth lowest sales tax rate. All of this may make residents feel special, but it means everyone depends on fossil fuels to stay healthy.
In one of his last interviews before he died in 2005, former Wyoming Republican Gov. Stan Hathaway told journalist Sam Western: “I passed the first severance tax. I got the Permanent Mineral Trust Fund, and they’ve carried Wyoming’s expenses very well.” But, he added, it bothered him that most people in Wyoming believed the were getting “a free ride.” Hathaway did not intend to give Wyomingites a free ride: “The truth is,” he said, “we all should pay our share of government costs.”
In the late 1960s, Wyoming’s economy depended on another industry — agriculture — that was rapidly going downhill. When Hathaway checked the balance in the state’s general fund and found there was only $80, he knew he had to act before the state went flat broke.
Wyoming legislators at the time, including future Gov. Ed Herschler and future U.S. Sen. Alan Simpson, initially opposed the governor’s severance tax proposal. But when Hathaway challenged them to figure out an alternative, they admitted they couldn’t come up with one. They passed the tax.
All this might sound familiar today, though Wyoming currently has considerably more than $80 in the bank. Our “Rainy Day Fund” is among the richest in the nation, with roughly $1.7 billion. But the state is projected to lose $1.5 billion in revenue over the next two years, which would nearly erase it.
First, there does not appear to be a single revenue generator like Hathaway’s severance tax that can replace our disappearing fossil fuel revenues. Taxing wind won’t do it, though the state goes after wind with punitive taxes, and neither will taxing tourism. We are going to need a variety of revenue sources to make up for what we’re losing — including — gasp — taxing ourselves.
Second, there are few state lawmakers today willing to accept tough answers to Wyoming’s budget problems. When a Republican legislator proposed a corporate income tax last year — Wyoming is one of only two states in the nation with no mechanism to tax corporate profits — it wasn’t even brought up for debate.
Politicians here tend to talk about cutting spending instead of replacing lost revenues, and few offer actual solutions. Maybe it is hard to blame them. Wyoming is filled with people who have either lived their entire lives here never having to pay state taxes, or who came here specifically because they saw a big neon sign that said “free ride.”
But, of course, the ride was never really free, and the mining companies that have carried the state for 50 years are now asking for their own tax breaks.
Wyoming, like everywhere else, needs schools, roads, hospitals, firefighters and other basic public services. And like my neighbor Nick said, believing we can have these things without paying taxes is just stupid.