Keep an Eye Out for Tax Increase Legislation in 2020

by Philip Baron, MBA

As 2019 draws to a close let's look at the tax increase bills to watch out for in the 2020 budget session. Here is a summary of the tax increase bills that have been endorsed by the Interim Joint Revenue Committee for introduction in February 2020.

Corporate Income Tax:

Link to bill: National Corporate Tax Recapture

The biggest tax increase bill of 2020 will be the purposed corporate income tax. A new version of a bill from the previous session has been repackaged as "National Corporate Tax Recapture" and purposes a 7% corporate income tax on all businesses in Wyoming with more than 100 shareholders. This bill is of most concern since it sets up the administrative structure for collecting a personal income tax in Wyoming.

The bill has been sold as a way to bring money back into the state. With supporters of the bill stating that this is not a tax increase. This is not true since businesses operating within Wyoming who have their headquarters in another state do not always pay corporate income tax on their business done in Wyoming.

If they are subject to paying corporate in their home state on business done in Wyoming, they may be doing so at a lower tax rate. Twenty-nine states have corporate income tax rates that are lower than 7%. For businesses operating in those states who do business in Wyoming this would be a tax increase.

The corporate tax cuts into a businesses' profitability and makes large publicly traded companies that would have to pay the tax uncompetitive with large privately-owned corporations who are not subject to the tax.

A business with a nationwide pricing model paying this tax would be incentivized to hire less workers in order to pay for the costs of the tax. Businesses who do not have a nationwide pricing model would be incentivized to raise their prices in order to pass on the costs of the tax to the consumer.

Gas Tax Increase:

Link to bill: Fuel Tax

At the Joint Revenue Committee meeting in July 2019, Wyoming lawmakers were presented draft legislation to increase the state fuel tax by 3 cents per gallon. According to the Wyoming Department of Transportation (WyDot), this tax would bring in $20 million a year. WyDot would receive 67% of this revenue, about $13.4 million, and the rest would go towards the maintenance of county and city roads. The Wyoming Department of Transportation claims to have a current unfunded need of $135.6 million for road maintenance.

Optional Municipal Tax:

Link to bill: Optional Municipal Tax

A draft bill presented to the Joint Revenue Committee in July of 2019, would allow voters in a city to approve a sales tax increase (up to 1%) for up to four years. Tax increases imposed for a specific project would expire if they collect the amount of funding needed for the project before the four-year time period.

An optional municipal tax means that a city could choose to tax itself for a specific project without the approval of the rest of the county. This tax is in the best interest of the city government because it could impose a tax on its residents and would receive all of the tax revenue collected. Smaller cities in that county would receive less tax revenue under a municipal tax than a countywide tax, because the money would no longer go to the whole county.

Amendments to this bill have been suggested over that summer that would make the fifth penny optional county wide sales tax permeant. It was also suggested at the last Joint Interim Revenue Committee that the fifth penny should not be permeant and that voters should be able to decide at each election if their county should repeal this tax.

Agricultural Land Tax Exemption:

Link to bill here: Agricultural Land Qualification

In November 2019 the Interim Joint Revenue Committee sponsored a bill for the 2020 session that would raise the amount of production required to be considered as agricultural land. Under current law in order for land to be classified as agricultural land for tax purposes the owner of the land has to show that the land is being used to produce a minimum amount of agriculture.

Right not $500 worth of production resulting from the sale of an agricultural product has to be produced in that land in order for it to qualify for a tax exemption. Agriculture landowners pay reduced tax rates when their land is assessed for agricultural purposes instead of industrial purposes. They pay a property tax that is based on the value of what is produced on that land.

Some argue that the bar is set too low for land to be classified as agricultural property and that the required amount of production on the land should be $3,000 or even $10,000.