Khale Lenhart

There are few things that we in Wyoming hate more than taxes. This sentiment was on full display at recent meetings of the Legislature’s Revenue Committee, where legislators heard significant public comment decrying increases in property taxes and urging the Legislature to do something about it. Some commenters said their property tax bills have nearly doubled since 2020, while certain others suggested cutting state spending, and specifically state spending on mental health treatment, presumably to reduce the need for revenue from property taxes.

Despite how it may seem, property tax rates have not gone up. Instead, the increase in property tax bills has primarily come from an increase in property values. As anyone looking to buy or sell a house will tell you, home prices have increased substantially over the past few years. Because our property taxes are based on the property’s assessed value, as property values go up, so do the amount of taxes owed.  

Those raising the issue of property tax increases have a point. For some people, the increase in property taxes can be very serious. Especially for those on fixed incomes, increases in property taxes can put them at risk of losing their homes. Fortunately, the Legislature passed an increase in property tax rebates for eligible individuals in 2022 that can help some of those most affected by property tax increases.  

Nevertheless, the question remains, what should the state do about increasing tax burdens on Wyoming citizens? After all, despite how much we hate paying taxes, funding for government operations has to come from somewhere.  

Before we can address whether property taxes are too high, we must first understand Wyoming’s tax system as a whole. Wyoming is one of only nine states not to have a state income tax.  We do not tax earned income or capital gains on a state level. We have no corporate income tax. Our state sales tax is low and, despite recent comments, Wyoming’s property tax rates are among the lowest in the country. In fact, according to a 2019 study by the Tax Foundation, only two states had lower residential property tax rates than Wyoming: Hawaii and Alabama.

Instead, Wyoming’s government is primarily funded by severance taxes from the extraction industries. For decades, we have been fortunate to depend on the extraction industries to fund our state and allow us to build sovereign wealth funds to keep funding it into the future.  

This system, however, is not without its imperfections. The extraction industry is a “boom and bust” industry where revenues can vary widely over time. While we have grown accustomed to these booms and busts, the trendline shows that the booms have become smaller and the busts deeper. The time is coming that taxes from the extraction industry can no longer support Wyoming state government.

So how does this tie in to increases in property taxes? We in Wyoming have become accustomed to paying very little in the way of taxes, and none of us want that to change. However, unless we make proactive changes to our state revenue system, increases in property taxes may just be the first domino to fall in a series of changes that place most of the tax burden directly on Wyoming citizens. We can keep our sales and property tax rates low, and avoid a state income tax, but we are going to need to develop new state funding streams to do so.

Wyoming should look to the example of other non-income tax states to see how they get their revenues. Some have taxed capital gains or investment income at certain high thresholds. Others have attracted major industries to their states to increase the tax base or have created special taxes on specialized industries. Almost all of them have far higher sales and property taxes than we do, and most have a broader tax base. The amount of state and federal lands we have that are not paying property taxes is a major disadvantage.  

The future system that I hope for is a “little bit of everything” approach. Even if it declines further, we will likely always have some extraction industries in the state. Hopefully, we can retain some revenue from those industries, supplementing it with our existing sales and property taxes, and ideally increased dividends from our state investments. Capable leadership in the state treasurer’s office is key to our future prospects. In addition to that, growing new industries would likely lead to increases in sales tax revenues, and it is worth looking into smaller changes we can make to add new revenues, whether that be capital gains taxes above certain thresholds, developing and taxing industries akin to what Nevada did with gambling, or finding ways to capitalize on other industries based on our natural strengths. Begin now, and maybe we can avoid creating new reasons to complain about our taxes going up.

(Cheyenne attorney Khale Lenhart is a former chairman of the Laramie County Republican Party. He can be reached at khale.lenhart@gmail.com.)