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Revenue Committee rejects multiple tax proposals amid historic budget shortfall

CHEYENNE – With Wyoming bracing for its largest revenue decline in state history, lawmakers rejected every tax-raising proposal on their agenda during a committee meeting Tuesday.

Due to long-term declines in its energy industries and the economic downturn brought by COVID-19, Wyoming has been projected to see its revenue drop by $1.5 billion total over the next two years. In response, Gov. Mark Gordon has already directed state agencies to cut 10% of their budgets, which totals about $250 million.

On the other side of the state’s fiscal policy, revenues have dwindled over the last decade-plus. Mineral severance tax revenues, a main pillar of the state’s budget, have dropped from a recent high of about $1.1 billion in 2008 to roughly $450 million forecasted for Fiscal Year 2020.

While that decline has led to some calls to diversify the state’s fiscal structure, lawmakers on the Joint Revenue Interim Committee turned down proposals to increase both sales taxes and property taxes during their meeting Tuesday.

Frustrations from lawmakers on both sides of the issue boiled over at the end of the all-day meeting. Committee co-chair Rep. Dan Zwonitzer, R-Cheyenne, pleaded with his colleagues to get a single committee bill advanced for consideration during the Legislature’s next session.

“If not this, I would really like one of you tell me what the heck that you will vote for that helps us get out of the situation we’re in, or tell me that you really truly don’t believe that we have a $1.5 billion deficit – the worst in the entire history of Wyoming – that you don’t want to solve,” Zwonitzer said.

Committee members opposed to the tax proposals, in response, were just as exasperated. Sen. Bo Biteman, R-Ranchester, said he was sick of the tone of the committee, “especially the two chairmen,” namely Zwonitzer and Sen. Cale Case, R-Lander.

“To chastise members of this committee who don’t want to raise taxes and come to this job with a mandate from our voters to not raise taxes is an insult, and I’m not going to take it anymore,” Biteman said.

The tensions emerged as the committee was considering a bill to raise the state’s nonindustrial property tax rate from 9.5% to 10.5%. The increase was estimated to bring $52 million annually to the state.

Earlier in the all-day meeting, the committee rejected a bill that would have removed some sales tax exemptions on items like manufacturing equipment, while expanding the number of services that could be taxed for sales. Estimates show a full repeal of the state’s tax exemptions would net Wyoming more than $150 million a year.

Though they then rejected the bill, lawmakers agreed to leave the state’s sales tax exemption on groceries, which some argued would have a disproportionate effect on low-income Wyomingites.

Christine Porter, a health sciences professor with the University of Wyoming, told the committee that removing the exemption for groceries was “probably the worst and most regressive tax you could put on any sales of services or goods, because of course, everyone has to buy groceries.”

“All sales taxes are regressive in the sense that they cost the poor much more than they cost the rich proportionately,” said Porter, who was also representing the Wyoming Food Coalition. “It’s sort of like charging a higher tax rate on poor people than on rich people.”

A majority of lawmakers ultimately agreed that the grocery exemption should stay, though the bill as a whole was then rejected anyway. The exemption repeal has been essentially the only revenue-raising proposal that Gordon has mentioned while discussing cuts.

After lawmakers rejected the bill removing some of the exemptions, they then turned down a proposal to increase the statewide sales and use tax from 4% to 5% – a proposal that would bring about $150 million annually into Wyoming’s coffers.

During discussion of that proposal, Zwonitzer echoed the frustrations expressed last week by the Joint Appropriations Committee about the lack of details on the state’s $250 million budget cut so far.

“I know this is a tough vote before you,” Zwonitzer said. “I think it would be a lot easier to vote if you had heard from your constituents, who are probably going to be losing their positions, or teachers, or where this 10% cut is happening.”

Without much other discussion on the sales tax increase, the committee then rejected the measure by a 7-7 vote.

It remains to be seen what steps lawmakers will ultimately take to offset the state’s massive projected deficit.

While the state’s “rainy day” fund is still projected to have nearly $1 billion at the end of the 2021-22 biennium, that number is roughly equivalent to the state’s general fund shortfall of $877 million, meaning the savings account could be essentially exhausted unless lawmakers approve more cost-cutting or revenue-raising measures.

Lawmakers also decided Tuesday to postpone votes on a couple of other bills, including one establishing a real estate transfer tax and another phasing in additional school mill levies. The proposals could be further debated during the committee’s next meeting sometime this fall.

While the meeting ended with some tension, the co-chairmen tried to leave things on an amicable note. Case, who said he would like to see corporate and individual income tax proposals on the table soon, acknowledged they serve on “the toughest committee in the world” amid “the toughest times in the world.”

“Nothing’s ever over in the Legislature, so let’s just take this vote and be respectful of each other and go forward,” Case said. “Tomorrow’s another day.”