Failure of ‘big box tax’ was Wyoming Legislature’s folly

The biggest disappointment of the recent legislative session was the failure of lawmakers to pass a new tax to help fund education. Blame it all on the Senate.

Rep. Jerry Obermueller (R-Casper) sponsored a corporate income tax and the House passed it by a wide margin. The upper chamber, however, was too intimidated by big business and Wyoming Republican Party leaders to even vote on the proposal.

House Bill 220 —National Retail Fairness Act had everything going for it, including stated support from legislative leaders in both houses. It was a well-crafted vehicle for taxing large out-of-state corporations doing business in Wyoming without affecting consumer prices, costing jobs or shuttering “big box” stores or franchises.

A seven percent tax would have been implemented on the profits of corporations with at least 100 shareholders. It would have applied to retail stores like Walmart and restaurant chains like Applebee’s.

Lawmakers liked to call it the “big box tax,” probably because they didn’t want to immediately doom it by using the words “corporate income tax.”

Proponents pointed out that a TV set or a steak bought from any of these corporations costs the same amount in Cheyenne as it does in Chicago, Portland (Oregon or Maine) and San Francisco — places where retailers already pay such income taxes. In other words the tax wouldn’t affect prices here.

That’s because the profits reaped by Target in Wyoming are ultimately taxed in its home state, Minnesota. In the case of Walmart, Wyoming’s failure to draw a tax effectively pads the books of state government in Arkansas.

Because Wyoming and South Dakota are the only states that do not levy either a corporate income tax, gross receipts tax or franchise tax, the monies not collected here are simply garnered elsewhere. As such, a 7 percent take here wouldn’t change how much the corporations have to pay in the end, it would only affect which state gets the money. By standing on rigid anti-tax principles we’re watching those dollars travel out of state.

The Wyoming Department of Revenue estimated HB220 would have raised $45 million a year for the state’s public schools. Director Dan Noble emphasized that his department’s projection was conservative, so that’s the floor in increased revenues for education. It may have been a lot more.

But when HB 220 reached the Senate Corporations, Elections and Political Subdivisions Committee, it ran into a buzz saw. Corporate lobbyists came out of the woodwork. Anti-tax lawyers and organizations like the Wyoming Liberty Group joined them in predicting economic calamity: Stores and restaurants would close by the dozens throughout the Equality State, potentially throwing thousands of employees out of work. The state party made no new or increased taxes one of its top goals, and it mounted an all-out assault against HB220. So did lawmakers like Sen. Bo Biteman (R-Sheridan), who reminded the committee, “None of us campaigned on raising a corporate income tax, none of us did. If we did, we wouldn’t be here.”

But a member of the panel, Sen. Cale Case (R-Lander), said what the huge corporations targeted by the bill would pay amounts to “peanuts.”

“I support that tax and I’m catching hell for it,” Case said. “But most people who email you against it haven’t thought about it for five minutes.”

The committee heard arguments lambasting Obermueller’s proposal for four hours one night. Supporters still held out hope, but what happened was truly unexpected.

Several members, including Chairman Bill Landen (R-Casper), said why they liked the corporate tax concept. He decided, however — no doubt after consulting Senate leaders — that the bill had no chance of passing in the tax-averse Senate, so he didn’t even allow a vote. The most talked about bill of the session died an unceremonious death when the committee laid it back.

The big box tax deserved a debate on the Senate floor, but apparently enough senators insisted on not being forced to make a decision that could be used against them in their reelection bids. It’s that simple.

Obermueller’s big box tax bill made economic sense, and public schools could use the revenue. The Legislature has cut more than $100 million from the education budget during the past three years. While no reductions were made for the next fiscal year, cuts are not only looming, they’ve been threatened.

During the close of the session, Joint Appropriations Committee Co-chairman Sen. Eli Bebout (R-Riverton) said the failure of legislators to approve any tax measures means the Senate will push for budget reductions for education and social services in 2020.

Bebout — the only person to serve as both speaker of the House and president of the Senate in Wyoming’s history — carries much clout. He’s led the charge to deep-six tax bills during his Senate years.

But in 2019, Bebout did something totally uncharacteristic: he publicly supported both the big box tax and a 5 percent lodging tax. The latter would have funded the state’s promotion of its $3.8 billion a year tourism industry and also provided local governments much-needed revenue.

Was it all a sham? Did any of these tax bills ever have a chance, or did the GOP leadership just trot them out one by one to let the electorate see that their party stayed resolute in opposing tax hikes? I think it was just a game, but I don’t think rank-and-file Republicans were in on it. Many of them probably genuinely believe the state could benefit by whichever tax bills they supported, for whatever reasons.

Bebout himself later publicly rescinded his early support for the bill Obermueller designed, telling reporters he was against it after the bill’s fate had already been sealed.

It’s conjecture on my part, but I think the Senate, under the leadership of President Drew Perkins (R-Casper), Vice President Ogden Driskill (R-Devils Tower), Majority Floor Leader Dan Dockstader (R-Afton) and Bebout never had any intention of sending a tax bill to first-year Republican Gov. Mark Gordon.

No one in the upper echelon of the Senate wants to go down in history as the leader who raised taxes in deepest red Wyoming. They remember the flak the Legislature took from the public when it passed a small fuels tax hike in 2013.

Senate Republicans have no reason to fear for their party’s grip on legislative dominance — they hold a 27-3 supermajority over Democrats — but angering state party bosses always includes the implicit threat of recruiting faithful anti-tax primary opponents.

Historically, the House and Senate have always believed that downturns in the minerals industries are temporary and the damages will be reversed when boom times return. If it doesn’t happen relatively quickly, they are comforted by the fact they can withdraw some savings, redirect budget flows and cut enough from education and social services to stem the tide until severance tax revenues climb back to normal or exceed expectations.

Getting the big box tax and lodging tax out of the House was a sign that times have changed. Even the staunchest of the old guard, it appears, have begun to recognize that the days are numbered for the old ways of funding state government. But if the Senate never alters its course, in the end it’s just an empty, meaningless gesture — and a monumental waste of time.