An Update on The Proposed Corporate Income Tax in Wyoming

by Philip Baron, MBA

Wyoming's proposed corporate income tax is back in a new version that was presented at the Joint Revenue committee in Pinedale on September 19, 2019. This bill sponsored by Rep. Obermueller, R – Casper, passed the committee with a 9 – 4 vote. This new version of the bill would tax all businesses with more than 100 shareholders.

This proposed tax is aimed at closing the gap on Wyoming's education spending problems. There is a clear drive between the public-school system in the state asking for more money, and the new tax initiatives proposed to the legislature.

The fight is for more money for schools, while on the other hand, they are one of the highest-funded public school systems in the nation at $16,442 per student.

The push for ever increased school funding has created tensions between all education groups, the legislature, and stakeholders who would have to pay the tax. There is strong opposition from the Wyoming Taxpayers Association and the Wyoming Retail Association, who say that the "100 shareholders" provision in the bill creates unequal competition amongst businesses. Not all large businesses have more than 100 shareholders, some large businesses would pay the tax, and some would not.

Revenue from the tax is now estimated at $23.1 million, down from the original $40 million estimate when the bill was first introduced in February 2019. The lower revenue estimate is due to an updated estimate that takes into consideration Wyoming's constitutional provision for a tax on income would allow full credit to any property, sales, and ad valorem taxes paid. These tax credits against the corporate income tax effectively exempt the minerals industry from paying the tax.

The tax credits would make a 7% corporate income tax have an effective tax rate of 3.6%.

Dan Nobel, director of the department of revenue, commented during the meeting and said that the tax would have to be around 17% to raise $100 million. This tax is not the solution to fixing the perceived education funding problem in Wyoming. One answer to the problem is for the public-school system to cut back on their spending and become more efficient.

Decreasing public school spending is easier said than done. While Wyoming has a constitutional provision for the legislature to provide for the establishment and maintenance of free public schools, case law requires it to be both efficient and equally available to all students. The constitutional provision is the most common objection against any cuts to school funding. However, nowhere in the Wyoming Constitution does it say that the Wyoming Legislature must fund public schools at ever increasing costs support a growing bureaucracy.

There are two sides to the equation, spending and revenue. Right now, spending is greater than revenue for public schools. The legislature should look at the spending side of the equation before increasing the revenue side of the equation.