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Is Wyoming Ready for Taxation?

Wyoming has long been praised as a pro-business state. With no corporate or gross receipts taxes on business income, and no taxes on personal income, Wyoming has consistently ranked as a top state for business investment and growth. But with the state facing deep budget cuts, including more than $100 million for K-12 education, “The Cowboy State” may be changing its tune. Both Wyoming Democrats and Republicans, long-term adversaries with regards to fiscal and social issues, recently introduced two bills that sought to fill the state’s coffers and close the gap in education funding. Although both HB220 and HB223 ultimately died in committee in February 2019, the traction they gained shows that increased taxation in Wyoming may not be the long shot it once was.

Wyoming Corporate Tax Proposal: HB220

Introduced by Republican Jerry Obermuller, HB220 sought to impose a 7% corporate tax on any company with more than 100 shareholders. “Big box” companies such as Home Depot, Walmart, and Applebee’s would have born the brunt of the proposed tax, with the goal of raising more than $45 million in revenue. The bill proposed that the revenue raised would be directed towards filling the budget gaps faced by public schools. Supporters of HB220 argued that the tax wouldn’t affect prices for Wyoming corporations or consumers, pointing out that products bought from any of these corporations cost the same amount in Cheyenne as they do in Chicago, Seattle, and San Francisco—locations where retailers already pay income taxes.

The push for a corporate income tax in Wyoming comes at a time when other states, both red and blue, are moving in the opposite direction and working to eliminate state corporate taxes. Last year, Connecticut reduced its top marginal corporate income tax rate from 9% to 8.25%. The District of Columbia cut its corporate income tax as well. Indiana’s corporate rate dropped from 6% to 5.75%. Less than a month ago, North Carolina’s corporate income tax, already the nation’s lowest among the states that impose the levy, was cut from 3% to 2.5%. Lawmakers in opposition to the bill used these examples to argue that HB220 would be going against the grain of conventional tax wisdom and would make Wyoming less competitive.

Republican Senator Bo Biteman of Gillette argued that the bill’s sponsors wouldn’t stop at this attempt to institute a corporate income tax in Wyoming. He said if the bill passed, it would pave the way for greater taxation and other measures that would kill lawmakers’ chances of re-election. “None of us campaigned on raising a corporate income tax,” Biteman said. “If we did, we wouldn’t be here.”

Wyoming Income Tax Proposal: HB223

House Bill 223, introduced by Democrat Cathy Connelly, proposed applying a 4% tax on income above $200,000. While Rep. Connelly and her colleagues were selling this as a tax on the rich, Wyoming Republicans argued that this income tax would also hit thousands of Wyoming’s small businesses that file under the individual income tax system. According to the most recent data available, more than 2,600 Wyoming LLCs filed under the individual income tax system in 2016 and had income in excess of $200,000. Those small businesses, along with the more than 5,000 partners and S-Corp shareholders across Wyoming who filed under the individual system and had income above $200,000, would be hit by the 4% income tax.

Equality State Policy Center Executive Director Chris Merrill questioned if these tax arguments would “win the day in the Senate? “Probably not,” he said, “but the sponsors of the bill should be commended for at least trying to think creatively about expanding the tax base in Wyoming.”

Both HB220 and HB223 died in the house, but the simple fact that these were bi-partisan bills and that they had some semblance of support, suggests that Wyoming may be ready to entertain the notion of collecting taxes from corporations and individuals.

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