You thought last year's Taxmageddon was bad? Hold on to your hat. And your wallet, because you are in for a ride.
Last week I explained that the Revenue Committee's ambition to broaden the sales tax to services would significantly increase the impact of the cost on your bottom line:
To get an idea of the impact of a services-tax extension, keep in mind that two thirds of consumer spending is on services. Two out of three dollars we spend, on average, buy services. An apartment lease is a service; your electricity bill is for a service; your auto insurance is a service. It remains to be seen exactly what services will be covered by the tax, and how the tax is going to be counted. However, until the Revenue Committee or the Economic Analysis Division release any kind of estimate of the impact of the services sales tax, it is a good default assumption that for every dollar in spending that you pay sales taxes on today, you will be paying it on $3 if this bill passes.
I then noted that the Revenue Committee had told us that a cut in the sales tax from four percent to 3.5 percent would make this sales-tax expansion "revenue neutral", asking
what calculations have they done to reach the conclusion that a 3.5-percent sales tax across the board is the right rate for whatever kind of revenue neutrality they are pursuing? I have studied tax reforms for more than 25 years, and I know of no reform anywhere, American or other, that has been revenue neutral. ... I might also add that the idea is revenue neutrality for government, not cost neutrality for the taxpayer.
I then noted that once the state sales tax has been expanded to services, as well as to groceries, it automatically opens for local sales taxes to be levied on the same products. The bottom line, then, is a major increase in the sales-tax burden on Wyoming families.
Well... there is just one pesky little detail missing. The state sales tax is not at all going to be cut from four to 3.5 percent. According to another bill, sponsored by the Revenue Committee, the state sales and use tax will go up from four to 4.5 percent:
Effective July 1, 2019, in addition to the sales tax under subsections (a) and (b) of this section there is imposed an additional sales tax of one half of one percent (0.5%) which shall be administered as if the sales tax rate under subsections (a) and (b) of this section was increased from four percent (4%) to four and one-half percent (4.5%).
In other words, we are looking at
- An expansion of the state sales tax to services
- An expansion of the state sales tax to groceries
- An expansion of the local sales tax to services
- An expansion of the local sales tax to groceries
- An increase - not a decrease - in the state sales tax.
At the same time, the Revenue Committee has made very clear that the broadening of the sales tax is "revenue neutral". That's lollygagging nonsense. We are looking at a major increase in our tax burden.
But the sales tax increase is not the only one coming down the pike.
The lodging tax hike is back on the table. Proponents keep telling us that 85 percent of it is paid by out-of-state visitors, so it is really free money. Well, I assume that when those proponents travel to, say, Florida for a week's worth of vacation, the high taxes on lodging down there won't reduce their vacation budget. I am sure that the lodging-tax proponents bring some extra money with them so they can merrily pay the higher taxes wherever they travel. They don't cut spending on other items.
A nine-mill tax on personal and commercial property is expected to generate $100 million in extra revenue for schools. Some estimates suggest an increase of approximately $85 per year per $100,000 of home value. I would not take that number to the bank, especially since it is calculated on personal property. Keep in mind that this applies to commercial property as well, which means that every business in this state will have to dole out more money, either because they own property or because their landlords will want to be compensated for the tax hike.
Then we have the corporate income tax, which for some reason all tax-hike proponents exclude from their lists of higher taxes. The reason is of course that the Revenue Committee carefully avoided making any decisions on it; as I explained back on November 29,
a) The Revenue Committee, and the legislature, will move forward with this issue. Plain and simple.
b) The first step will be a combination of a bill from Representative Obermueller and an amendment that appropriates money for a study of how exactly to design a corporate income tax. That money will be appropriated by the upcoming legislative session.c) The study will recommend mandatory revenue reporting as a "dry run" for a tax. It will also conclude that it is not feasible to create a corporate income tax while Section 18 [of the Wyoming Constitution] is still in place. There will be two recommendations: either the legislature opts for a gross receipts tax - if they can design it in such a way that it mimics a corporate income tax but does not trigger Section 18 deductions - or it goes all out and asks voters to repeal Section 18.
Section 18, of course, allows for a full deduction of the costs for sales and property taxes from any income tax. As absurdly impractical as this deduction is (how do you account for all the sales taxes you pay in a year?) it is a technical obstacle in the way of an income tax. But it is an obstacle that the Revenue Committee is now determined to overcome.
As always, every little tax hike is sold as insignificant. Of course it is. When your basement is being flooded, each fluid ounce of water is insignificant.
I do not yet have a sum total for all these tax hikes, primarily because we still don't know what the corporate income tax is going to look like. One big problem there, of course, is that if the legislature ends up raising and broadening the state sales tax as proposed by the Revenue Committee, and if they also jack up the property tax, Section 18 in the constitution becomes a bigger obstacle to the income tax. This increases the likelihood that the legislature passes a bill to "study" how to repeal Section 18 to pave the way for a corporate income tax.
In the meantime, they are free to raise every tax they can get their hands on. They did nothing last year on taxes, which was good, but they also did not do anything on the spending side, which only compounded the state's fiscal problem. A preliminary impression from the Appropriations Committee meeting is that they do not seem to be all that keen on doing much on the spending side this year either. Therefore, if we add the probable outcome of their meeting to what the Revenue Committee accomplished at its November meeting, we can look forward to business as usual on the spending side - and higher taxes in every cardinal direction on the revenue side.
All this while the Wyoming economy is heading back into a recession.