Among the issues before Laramie County voters on the August 21 was a one-penny sales tax initiative. County commissioners had compiled a list of eight spending propositions. Five of them were approved, with a total spending commitment of $82 million. The tax will take effect in Laramie County on January 1, 2013 when anyone purchasing taxable merchandise will be charged a 6 percent sales tax. Once the “One Percent Specific Purpose Tax” amount is collected, the tax is supposed to be reduced to the present 5 percent level.
While the County does not publish its budget online – making it very difficult for voters to hold them accountable for how they spend our tax dollars – we can use indirect measures to estimate how much money the county could be expecting each year from its extra sales tax penny. These measures give us reasons to believe that the county is in way over its head with $82 million in new spending.
IRS data shows that in 2009 local governments in Wyoming collected a total of $261 million in sales tax revenues. This is, again, for all counties. Using a number of variables, including the county’s share of total state population as well as average income and employment, we can estimate the Laramie County share.
From this we can conclude that:
- From a strict accounting perspective, an extra penny of sales tax should bring in $23 million per year at best; but
- $82 million was approved, leaving the County collecting the extra penny for approximately four years to pay off these obligations, if all goes well.
But there is one more aspect to this problem. Laramie County is not an isolated island – on the contrary, it is subject to the same kind of tax competition as any tax jurisdiction. With high sales taxes, Laramie County is effectively guaranteeing that its residents will at some point find it worth their while to go out of County for major shopping. Already now, consumers can benefit from a monthly shopping tour to Fort Collins where they can find big retail chains not present in Laramie County. The combination of County and state sales taxes (remember that the state wants to raise its sales tax by one penny) plus the possibility of a higher gasoline tax in Wyoming all conspire to driving retail business across county, even state lines.
As a matter of fact, the County should be aware of how sensitive its revenues are to tax competition from surrounding areas. If as little as two percent of consumer spending moves out of Laramie County, the one-penny tax-and-spend plan could be completely ruined. As a possible worst-case scenario, using economic modeling to estimate, such a two percent reduction could force retailers in Laramie County to lay off more than a hundred full or part-time workers.