As I explained in June, the Wyoming economy is heading for a hailstorm of tax hikes. That forecast is even stronger today than it was then, especially since the Revenue Committee recently decided to propose a gasoline tax increase. This is the same increase that was floated in the fall of 2010, only this time the committee is more honest: back then the argument was that they needed the money for so called Recreational Trails Program. This time around, the committee admits that it wants to spend most of the money on highway construction and maintenance.
Just like in 2010, there are numerous problems with the proposed tax hike. To begin with, it is going to take more money out of people’s pockets than the Revenue Committee estimates: calculations using the Wyoming Liberty Group’s Computative General Equlibrium model of the state economy show that in 2014 the increase in the gasoline tax will cost taxpayers $76.2 million per year as opposed to the $71.9 million suggested by the Committee. The extra $4.3 million may not seem worth mentioning, but given that the tax will cost the Wyoming economy an estimated 500 private-sector jobs each year, it is important to keep track of every $1 million that the government grabs from taxpayers’ pockets.
Furthermore, the part of the money that will go toward the Recreational Trails Program – an estimated $14 million based on 2010 parameters – is actually seed money for federal funds. For every dollar that the state spends on Recreational Trails it is eligible for five dollars from the federal government. If we assume that the same formula is still in place, Wyoming would receive another $70 million in federal funds.
Given the poor shape of the federal budget, this is a particularly bad time to make any part of the state of Wyoming more dependent on money from Uncle Sam. If anything, our state lawmakers should be working on plans to reduce our state’s dependency on federal dollars.
A third problem with the gas tax increase is that it will coincide with other tax hikes. Earlier this year there was a proposal floating around the state capitol to raise the state sales tax by one penny. The new revenue would go toward the same things as the gasoline tax, so we can assume for now that there won’t be any increase in the state sales tax. However, there is a significant risk that our counties will raise their sales taxes by a penny. If every county did that, and the state legislature passed the gas tax hike, the combination would dig a deep hole in the Wyoming economy:
- The private sector would lose up to 3,500 jobs compared to a scenario with no tax hike; and
- Wyoming families would see their disposable income drop by a total of $245 million.
There is no doubt that we need good highways and streets. But there are preferable alternatives to a higher gasoline tax. One such alternative is to turn I-80 into a toll road. This interstate is responsible for a very large portion of our state’s highway maintenance budget. A toll would create a direct link between usage, wear-and-tear and maintenance costs.
A Wyoming Toll Road would not solve all the problems, but it would free up significant amounts for maintenance of other highways.