Serving the Big Horn Basin for over 100 years
SHERIDAN — A recent study questions the equality of Wyoming’s tax structure and claims wealthy residents pay a small percentage of the state’s taxes.
The study was produced by the Institute of Taxation and Economic Policy in partnership with Better Wyoming, a liberal advocacy group.
In short, the report claims that Wyoming’s tax structure worsens economic inequality by relying on taxes that are disproportionately paid by working and middle class residents.
“It’s surprising to me that this isn’t more upsetting to people here, but it’s probably just because they don’t realize that this huge gap exists,” Better Wyoming director Nate Martin said in a statement.
The report concludes that Wyoming’s tax structure is “regressive” because the state’s low-income residents are taxed on a higher percentage of their income than wealthy residents. Because the state has a sales tax and no income tax, the report claims middle and working-class residents end up paying more taxes than wealthy residents.
Working-class residents spend a higher percentage of their paychecks than wealthy residents, which means a higher percentage of their paychecks is subject to sales tax.
Wealthy residents tend to save more of their income. Because of this dynamic, the report shows that the lowest 20 percent of earners are taxed on 9.6 percent of their income while the top 1 percent of earners are taxed on 2.6 percent of their income.
The report, however, only focuses on Wyoming taxes and does not take federal taxes into account. Though Wyoming does not assess and income tax, its residents still pay federal income taxes.
Most of Wyoming’s revenue, nearly 70 percent, comes from taxes on the mineral industry. Revenue from mineral taxes has slumped in recent years due to a bust in the energy sector, and while average wages have been similarly impacted. The state’s overall revenue has dwindled as a result.
“Regressive state tax systems didn’t cause the growing income divide, but they certainly exacerbate the problem,” said ITEP Director Meg Wiehe, who wrote the report. “State lawmakers have control over how their tax systems are structured. They can and should enact more equitable tax policies that raise adequate revenue in a fair, sustainable way.”
The report feeds into a broader debate, which has dominated discussions in many of this season’s races for public office, about how the state can diversify its economy and whether it needs to create a more equitable tax structure to do so. One of the report’s primary policy recommendations, the creation of a state income tax, has been largely rejected by candidates for both major parties.
Some candidates, though, have called for the creation of new taxes to expand Wyoming’s revenue streams and distribute responsibility for funding key services in the state more equitably among the state’s population. Others, though, have rejected the need for more taxes and advocated for a more efficient government
Whether politicians or, more importantly, voters, will be swayed by this recent report remains to be seen.