Debate focuses on tax breaks
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Feb 28, 2006 Posted by Bill Luckett
I think the big news today was the debate between the executive branch and legislative branch over tax cuts. In case you haven't heard, our state government is dealing with a massive budget surplus, enough to fund government at its current levels and still have enough left over to pay for the state General Fund share of state government for another two years.
Of course, Gov. Freudenthal's budget recommendations would use some of that extra money to invest in the people of this state. He also proposed substantial amounts of savings, including $415 million into the state's "rainy day account," which is formally called the Legislative Stabilization Reserve Account, which would bring that account's balance to $500 million. Another $600 million-plus will automatically flow into the Permanent Wyoming Minerals Trust Fund.
In his State of the State address, Gov. Freudenthal asked legislators to make good on a 11-year-old promise to reduce the state sales tax by a half of a cent if revenues are sufficient. Revenues have never been more sufficient, to say the least. All they have to do is leave at least $35 million in the General Fund at the end of a fiscal year, and our sales tax rate will drop from 4 cents to 3.5 cents. But since 1995, lawmakers have always swept all but $10 million from the General Fund into the Budget Reserve Account to make sure the state sales tax stays at 4 percent.
Gov. Freudenthal repeated this request in a Feb. 23 letter to legislative leaders. It would save Wyoming taxpayers $73 million a year. Republican legislative leaders wrote a letter back to the governor on Monday, suggesting that they would have to cut some of his other proposals to pay for such a tax cut. Today, Gov. Freudenthal wrote back to the legislative leadership and explained how his tax cut proposal works in conjunction with everything else he has proposed, and the budget will still be balanced. "Simply put, my budget balanced in December, it continues to balance when the proposed tax cut is included, and my proposal to generate a $500 million balance in the Legislative Stabilization Reserve Account remains in place," Freudenthal wrote to legislators today.
Republican legislative leaders then held a press conference today on the issue. Their main point was that, Wyoming's good fortune in revenues is due mainly to mineral tax income, and that income is not going to be around forever. Some day, we will run out of natural gas and other minerals to extract from the ground. When that day comes, decades from now, we are all going to have to pay higher taxes to keep up the level of government services to which we have become accustomed. And some of the Republican legislators contended that minerals prices are so volatile that it is even risky to rely on the officials projections of the joint executive-legislative Consensus Revenue Estimating Group.
Considering that several lawmakers are also pushing this year to remove the sales tax from groceries, House Speaker Randall Luthi, R-Freedom, said plainly that it would be irresponsible for the Legislature to enact both tax cuts. "We have clearly a choice in front of us. It's a choice rather to remove the tax on groceries, provide a statewide sales tax reduction of half a cent, and of course the other choice would be to do nothing, and that is what we will face as we continue on through this session."
So that will clearly be one of the biggest decisions legislators make as they work through the budget this week. In a time of unprecedented government budget surplus, will they see fit to lower our tax burden? Yes, our tax burden is relatively low compared to other states, but still, how much extra money do they need to take from us each year? They don't need it, at least, not right now. Certainly not when they're debating over how many hundreds of millions of dollars to save ($500 million or $600 million into the Legislative Stabilization Reserve Account, well over $600 million automatically flowing into the Permanent Wyoming Minerals Trust Fund, and a proposed $200 million more into the permanent fund on top of that).
They didn't get to these tough questions today, but they could as early as tomorrow. The House is still working through its first full read of the budget bill. Rep. Ann Robinson, D-Casper, has said she has prepared a budget amendment to remove the tax from groceries. Across the Capitol Building, Sen. John Barrasso, R-Casper, has prepared a similar amendment for senators to consider. As a relatively quiet budget session hits the middle of its third week, things look like they're about to get much more interesting.