Income tax bill dies in Revenue Committee

By Chrissy Suttles 

Wyoming Tribune Eagle

Via Wyoming News Exchange

CHEYENNE - A bill that would have created a state income tax to fund education in Wyoming died in the Legislature's House Revenue Committee on Friday, just a day after introduction. 

House Bill 233, sponsored by Rep. Cathy Connolly, D-Laramie, and Sen. Chris Rothfuss, D-Laramie, would have imposed a 4 percent tax on individuals and corporations earning more than $200,000 a year.  

But the bill was expected to affect only those making more than $350,000 a year - about 2,000 of the state's taxpayers - once other tax credits were applied.

It would have raised an additional $208 million in revenue for the Wyoming Department of Education's School Foundation Program annually. 

The legislation was an effort by Democratic lawmakers to continue serious talks about income tax in the state, and illustrate how it could solve a number of funding challenges. 

But after only about 30 minutes of discussion, the Revenue Committee failed to make a motion on the bill, effectively killing it. 

Many voiced their opposition - something Wyoming's Republican base has been doing for years, saying an income tax would stifle business development and put unnecessary burden on residents. 

Brett Moline, director of public and governmental affairs for the Wyoming Farm Bureau Federation, was concerned the proposal would hit more than Wyoming's wealthiest. 

"Large wholesaler rents his facility, gets a deduction for the rent and does not pay the property tax. He wouldn't get the credit and would be paying the income taxes," he said.

"This is a large change in Wyoming tax policy, and I believe it should be an interim topic so people from all over the state can have input," Moline said.

Former Laramie County commissioner and Republican M. Lee Hasenauer said Wyoming's GOP is still strongly against any income tax, and will continue to hold steady on the issue. 

"We do not raise taxes on businesses to increase the economy's income," he said. 

Wyoming Department of Revenue Director Dan Noble said executing the bill could be tricky because, as written, those who didn't meet the income threshold were not required to file at all. 

"If you make less than $200,000, how am I going to know that?" he said. "These are complex taxes and, if we're looking to get something up and running in a couple of years, we're going to look to buy software off the shelf. It's not cheap."

Republican lawmakers are considering other taxes to help diversify the state's revenue streams this session. That includes taxing out-of-state corporations and reinstituting a sales tax on groceries.

But Connolly said the state relies too heavily on these "regressive" taxes, which take more from low-income earners.

"The regressive tax hurts those in poverty the most," she said. "Some recent data indicates that those 200 percent below the poverty level pay a third of their income for food." 

Connolly and Rothfuss said their bill could have solved significant budget deficits without asking more of the middle class.

Elizabeth Storer, president and CEO of the George B. Storer Foundation, pointed to a recent Institute on Taxation and Economic Policy study that found states with higher income tax rates outperform those that don't. 

"As we have watched the state grapple with what to do for revenues, we have spent some time looking at these ourselves," she said. "We have a very regressive tax structure, which means we ask the most of the people at the lowest end of the earning."

But for Republicans, it's about ideology and economic values.  

Tom Schmidt of Laramie wrapped up public comment with a brief history lesson on income tax in the United States. He worried this bill would be a slippery slope. 

"If this income tax bill is passed, I believe, in time, the threshold will drop, and rates will go up until everyone in the state is caught up in it," he said.