In every discussion about taxes in Wyoming, some ominous voice notes that mineral revenues are in decline. Sooner or later, the voice warns, the tax base is going to have to be diversified - code for shifting the tax burden from the mineral industry to working families.
with the Heritage Society, the state's most visible pro-industry
group, says this all the time. People in Wyoming don't pay their
fair share, Schilling says to anyone who will
Wyoming doesn't have an income tax, but
some of the most influential people in Wyoming, people generally
connected to the minerals industry, are convinced that a state
income tax will be the inevitable result of tax-base
With a re-election campaign
coming up in 1998, it would be a surprise to hear Gov. Jim Geringer
even say the words "income tax." But at the governor's request, the
Legislature is setting up a Tax Reform 2000 committee to make
recommendations about potential changes in the state's revenue
Interestingly, the committee isn't
scheduled to deliver its findings until July 1, 1999, by which
time, presumably, Geringer will be comfortably settled in his
It is certainly high time there was
a serious discussion about the state's tax structure. But that
doesn't necessarily mean the state's only option is to lift the
"relative burden" off the backs of downtrodden taxpayers like
Exxon, Amoco and Cyprus-Amax and shift it to workers and their
Every year's a
First, the proposition that Wyoming
can't rely on the minerals industry to keep paying for everything
is not a given.
True, the state's mineral
revenues have been in decline. In 1986, mineral severance taxes
contributed $112 million to the general fund, which pays for
general government services. Today, mineral severance taxes
contribute about $65 million a year to the fund.
But every year is a record year in coal and gas production, and
there are indications that demand for natural gas and low-sulfur
coal will keep growing. Phase II of the Clean Air Act Amendments
will take effect in 2000 and further heighten the demand for
air-friendly fuels. Wyoming already supplies about 25 percent of
the nation's coal and 5 percent of its natural gas, and those
slices of the domestic energy pie will probably get bigger before
they get smaller.
Coal and gas may never be the
cash cow that oil has been. The price of both has been low. But
neither coal nor gas has to perform the way oil used to. To
compensate for declining oil revenues, the state has already
shifted part of the tax burden away from industry and onto the
general public by lightening the industry's tax load and raising
sales tax on groceries, clothes and other retail items. Sales tax
revenue has become the leading source of income for the state's
In fact, an argument could be made
that it is industry's turn to pay up.
trona set production records throughout the 1980s. Though both
industries were laboring during that decade under an extra 1.5
percent capital facilities tax, apparently it didn't drive them out
of business. That tax was allowed to expire in 1993; if the state
needs money, it could reimpose it.
gas production is skyrocketing, and the state should take a hard
look at raising taxes on gas producers as well.
Stop, look, and tax
the state needs more money, then even before looking at minerals,
Wyoming policy makers should look hard at the
Whatever else you say about the
mineral companies, they pay taxes - 6 percent of the production
value in state severance tax, about the same percentage in local
property taxes, and 12.5 percent or more in federal revenues, half
of which is returned to Wyoming.
families pay their share, too. According to a recent study from
University of Wyoming economist Shelby Gerking, a family of four
living on an income of $15,000 - there are families in Wyoming
living on only that much income - pay up to $1,000 or $1,200, 7 or
8 percent, respectively, of their income in state and local
Sales taxes, especially when applied to
food, as in Wyoming, are despicably regressive. The less a family's
income, the higher the percentage that goes to taxes. Gerking's
study found that a family with a $40,000 income pays a little more
than 5 percent of their income in state and local taxes. But a
family with a $70,000 income pays a little over 4 percent, half the
amount that poorer families pay.
Hauling it out, and hauling it
Meanwhile, back at the tracks, information
about railroad revenues is proprietary. It's tough to say how much
money the railroads make, and thus tough to know how much they are
paying in taxes.
But we can
The railroads pay no severance tax,
because they don't sever anything. They haul it out. And when it
comes to money, they haul it in. An electric utility in Texas or
the Midwest might pay a coal producer as little as $2.50 for a ton
of Powder River Basin coal. By the time that ton of coal gets to
its destination, it can cost as much as $40. And 91 percent of
Wyoming's coal is shipped out of state.
that figured out to about 255 million tons of coal hauled out of
Wyoming by rail. Even at a conservative delivered price of $25 per
ton, and deducting a statewide average coal price at the mine of a
little more than $6 per ton, the railroads collected about $4.8
billion hauling Wyoming's coal out of the state.
The only significant taxes railroads pay are property taxes. The
amount they pay is proprietary - you should know better than to
ask, according to David McCracken, director of the Wyoming
Department of Revenues Ad Valorem Division. But the railroads have
boasted about their tax payments in past years, and if those years
are any indication, it would be generous to estimate that
Burlington Northern and Union Pacific combined will end up paying a
total of $15 million in 1996 property taxes.
Which means that, while Wyoming's mineral companies might
contribute 18 or 20 percent of their gross income to the state and
local government revenue stream, and the state's poorest families
contribute 7 or 8 percent of their income, the railroads might pay
only three-tenths of 1 percent.
To be fair,
railroads have to pay taxes in other states, too. A ton of coal
might cross the borders of five states on its way to a power plant.
So if we split the $4.8 billion five ways, the railroads make a
little less than a billion from Wyoming operations. Assuming the
$15 million in property taxes, the railroad's tax burden relative
to income is still only 1.5 percent - roughly a fifth of the
relative burden borne by Wyoming's poorest
If the railroads met the same 7 or 8
percent burden that low-income families have to meet, it would mean
about $70 million in state revenues, which would compensate nicely
for the $50 million or so the state currently raises by taxing
Are there ways for Wyoming to increase
taxes on railroads? Federal laws insulate railroads from taxes
aimed specifically at them. But a tax on tonnage or some other tax
that the state could levy might stand up in
Those are some of the questions the state
should be asking as it reviews its revenue system. While they're at
it, similar questions can be asked about the phone company, the
power company, the gas company, power plants, power lines and
pipelines. As is the case with railroads, the only significant
taxes those entities pay are property taxes.
The bottom line
Wyoming has a tax policy, it has been to give the mineral companies
tax breaks and raise the sales tax on retail items, including food.
Judging from the statements of some of Wyoming's leading decision
makers, that policy will continue.
Unfortunately, Wyoming workers and families are not in much of a
position to start picking up the slack for the likes of Enron,
Chevron and Kennecott. In terms of income growth and the creation
of high-wage jobs, Wyoming has the slowest, least-diversified
economy in the nation.
And given the hikes in
the sales tax rate (lawmakers promised it would expire when they
passed it, by the way - now they're about to renew it), Wyoming
citizens, when told condescendingly that the tax base needs to be
broadened or diversified, can answer that they already gave at the
In the meantime, Wyoming might be
able not only to rely on the mineral companies, and their friends
in the rail and utility industries, but to thrive on them. And
might be stupid not to.
Jackson is a former reporter for the Casper Star-Tribune. He now
covers the gambling industry for the Las Vegas Business