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Gross Receipts Tax: Your Wallet, Your Jobs, and State Revenue

The Interim Revenue Committee will meet May 11th and 12th in Saratoga. On their agenda is yet another proposal to shrink revenues, a Gross Receipts Tax [GRT]. It would also shrink the Wyoming economy and – to kill three birds with one stone – shrink your wallet! They may not notice the thing about shrinking your wallet by an estimated $800 to $1000 dollars a year [about $3,600 for a family of four in direct and indirect costs], but you’d think they would notice the part about shrinking revenues, being the Revenue Committee and all.

Take off the blinders and look around. Low taxes help an economy to grow, and this can increase revenue, as Reagan’s famous tax cuts did when he lowered taxes. On the other hand, heavier taxes slow an economy and, sorry folks – decrease revenues. This law of economics is known as the “Laffer Effect.”  With a GRT, as you lost about $900 a year, so would everybody else, and this would add up, leading to fewer job opportunities and business start-ups.

Some legislators understand that when businesses fail you cannot tax them, but others apparently see “no choice” but to drive up taxes even if it means shooting their dreams in the foot as they do you in. They are not above using children as tax bait.

We are in for a ride. Which road should we take – the road to job and business gains, or the road to job and business losses? What would you say? This question belongs at the top of the Committee’s agenda, but they seem to be busy avoiding it.

Instead we see a GRT proposal that miserably fails the Laffer test. Like car buffs, government actors continue to trade ideas about vehicles for the downhill tax ride – tobacco vehicles, agriculture vehicles, property vehicles -- more than a dozen tax vehicles appeared in the 2017 Session, complete with rose-colored glasses for drivers lest they see where they are really going. The truth is that there is no way tax increases in any form can keep government-as-usual afloat.

It doesn’t have to be this way. Last session the Legislature gave Governor Mead an opportunity to use an efficiency report system. If that became fully funded and implemented it might save $150,000,000 every year and improve government services. The Judiciary Committee’s excellent bill for Criminal Justice System reforms did not pass, but a similar bill and other CJS reforms could bring big savings. These are only two approaches of many that have been proven elsewhere that we could put to work in Wyoming to help grow the jobs and businesses we so desperately need.

Just in case, you need to know what you would be in for if a GRT arrives at your wallet. There would be daily GRT pings, depending on how this GRT vehicle is designed. When somebody rendered you a service, an add-on charge would ping your attention and your wallet: plumber, barber, landlord, lawyer, realtor, and so on, ping, ping, ping. The ones who had to ping you would have to keep track. Got time?  Have a nice day.

For more information about Gross Receipts taxes, see

http://www.thewyomingprosperityproject.com/2017/05/the-gross-receipts-tax-first-analysis.html

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Comments 3

Guest - Tim Kingston on Saturday, 13 May 2017 14:09

Ms. Gore is simply wrong. The deficit began to balloon after Reagan's tax cuts and he then, oh my gosh, enacted several subsequent tax increases. To say or believe that the Laffer "curve" is some kind of economic gospel is equally wrong. Few economists subscribe to it and history certainly proves it to be misguided. Also, even now, with Trump's tax cuts possibly looming (in no way can they be characterized as tax "reform," they are simply tax cuts that will balloon the deficit), nearly every economist, including conservative ones absolutely predict that the deficit will greatly increase. At least Obama's spending was honest in that it was deliberately done to stave off an even worse recession. But, again, the Trump administration wrongly, and knowingly wrongly, argues that they will not lead to greater budget deficits. We will end of borrowing to pay for them.

I know that I've ignored the GRT Ms. Gore discusses above, but had to push back on her mantra of lower taxes makes more money. Simply not the case.

Ms. Gore is simply wrong. The deficit began to balloon after Reagan's tax cuts and he then, oh my gosh, enacted several subsequent tax increases. To say or believe that the Laffer "curve" is some kind of economic gospel is equally wrong. Few economists subscribe to it and history certainly proves it to be misguided. Also, even now, with Trump's tax cuts possibly looming (in no way can they be characterized as tax "reform," they are simply tax cuts that will balloon the deficit), nearly every economist, including conservative ones absolutely predict that the deficit will greatly increase. At least Obama's spending was honest in that it was deliberately done to stave off an even worse recession. But, again, the Trump administration wrongly, and knowingly wrongly, argues that they will not lead to greater budget deficits. We will end of borrowing to pay for them. I know that I've ignored the GRT Ms. Gore discusses above, but had to push back on her mantra of lower taxes makes more money. Simply not the case.
Susan Gore on Monday, 15 May 2017 08:55

Wyoming is in trouble. Our state is spending about $400,000,000 a year more than it is taking in, and this is getting worse. Should we take $400,000,000 more from our private economy, or should we streamline government and reduce spending?

Mr. Kingston favors taking more from the private economy. But in doing this he would not take care of his own needs or the needs of the many who have become financial dependents and entitlement prisoners of government, let alone those who are still producing the goods and services we all need.

When you take resources away from those who produce, they can’t produce as much, governments can’t tax as much, and then, along with everybody else, even government dependents get less. Picture a rancher who needs to buy more stock. Instead he has to pay the money for taxes, so he produces less beef and we get less beef to eat. The next year his profits will be down and he will have even less money to pay taxes and buy stock, so the government will get even less and we will have even less beef. Due to these sorts of effects over time large governments simply can’t tax enough to meet their promises, and everybody suffers. We are all in the same boat.

What works is keeping resources in the private sector so more gets produced for everybody. We in Wyoming have a generous spirit, and we do our best to take care of our neighbors.

Forgive me for believing in human ingenuity and the creative potential of both established and new businesses.

Wyoming is in trouble. Our state is spending about $400,000,000 a year more than it is taking in, and this is getting worse. Should we take $400,000,000 more from our private economy, or should we streamline government and reduce spending? Mr. Kingston favors taking more from the private economy. But in doing this he would not take care of his own needs or the needs of the many who have become financial dependents and entitlement prisoners of government, let alone those who are still producing the goods and services we all need. When you take resources away from those who produce, they can’t produce as much, governments can’t tax as much, and then, along with everybody else, even government dependents get less. Picture a rancher who needs to buy more stock. Instead he has to pay the money for taxes, so he produces less beef and we get less beef to eat. The next year his profits will be down and he will have even less money to pay taxes and buy stock, so the government will get even less and we will have even less beef. Due to these sorts of effects over time large governments simply can’t tax enough to meet their promises, and everybody suffers. We are all in the same boat. What works is keeping resources in the private sector so more gets produced for everybody. We in Wyoming have a generous spirit, and we do our best to take care of our neighbors. Forgive me for believing in human ingenuity and the creative potential of both established and new businesses.
Susan Gore on Monday, 15 May 2017 14:44

Tim Kingston is simply not familiar with the facts. As data from the Office of Management and Budget shows, in the two years before the Reagan tax cuts went into full effect, total federal tax revenue was barely growing at all: up 3.1 percent in 1982 and down 2.8 percent in 1983. Once the substantially lower taxes unleashed the economic power that is the American economy, the federal coffers were flooded with tax revenue: in 1984-87 revenue increased by 9.2 percent per year, on average.

Likewise, the Bush tax cuts had substantial Laffer effects. In 2000-2003 federal tax revenue decreased by an average of 0.4 percent per year. By contrast, in 2004-2007 revenue grew by 9.6 percent per year, on average.

One of the typical talking points used against these numbers is that in both instances, the business cycle shifted from bust to boom at the same time as the tax cuts went into effect. That, however, is an uninformed argument: a boom always has a cause, one of them being that government leaves more money in the hands of those who make it.

As for the federal budget deficit, during the Bush years the boom in tax revenue was en route to eliminate the deficit. Had the economic crisis not broken out in 2008, the federal budget would have been in surplus in 2009. With that said, Tim Kingston does have a point about spending during Obama: thanks to his lack of desire to work with Republicans on a budget deal, Obama presided over a status-quo kind of trend in federal spending. With continuing resolutions, the outlays of the federal government increased less in Obama's second term than under any other president since World War II except Bill Clinton. Had Obama gotten what he wanted, the federal deficit would have been substantially higher when he left office.

Tim Kingston is simply not familiar with the facts. As data from the Office of Management and Budget shows, in the two years before the Reagan tax cuts went into full effect, total federal tax revenue was barely growing at all: up 3.1 percent in 1982 and down 2.8 percent in 1983. Once the substantially lower taxes unleashed the economic power that is the American economy, the federal coffers were flooded with tax revenue: in 1984-87 revenue increased by 9.2 percent per year, on average. Likewise, the Bush tax cuts had substantial Laffer effects. In 2000-2003 federal tax revenue decreased by an average of 0.4 percent per year. By contrast, in 2004-2007 revenue grew by 9.6 percent per year, on average. One of the typical talking points used against these numbers is that in both instances, the business cycle shifted from bust to boom at the same time as the tax cuts went into effect. That, however, is an uninformed argument: a boom always has a cause, one of them being that government leaves more money in the hands of those who make it. As for the federal budget deficit, during the Bush years the boom in tax revenue was en route to eliminate the deficit. Had the economic crisis not broken out in 2008, the federal budget would have been in surplus in 2009. With that said, Tim Kingston does have a point about spending during Obama: thanks to his lack of desire to work with Republicans on a budget deal, Obama presided over a status-quo kind of trend in federal spending. With continuing resolutions, the outlays of the federal government increased less in Obama's second term than under any other president since World War II except Bill Clinton. Had Obama gotten what he wanted, the federal deficit would have been substantially higher when he left office.
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