In Fiscal Year (FY) 2011, Wyoming collected $3.7 billion in state and local taxes. While this is an impressive sum of money, it tells us little about whether or not the average Wyoming taxpayer can afford this level of taxation.
As shown in the charts below, Wyoming’s state and local tax burden (tax collections divided by personal income) was the fourth highest in the nation for FY 2011 at 13.8 percent—or 31.7 percent above the national average of 10.5 percent. Due to the rise in severance taxes, Wyoming’s tax burden has grown tremendously over time by 95 percent to 13.8 percent in FY 2011 from 7.1 percent in FY 1950.
If all other taxes, such as severance taxes, were excluded from Wyoming’s tax burden then Wyoming would rank as the fourth lowest tax burden in the country at 8.5 percent. This low ranking stems from the fact that Wyoming does not have a state individual or corporate income tax.
Wyoming severance taxes on oil, gas, and coal also fuels their Permanent Wyoming Mineral Trust Fund (pdf) enshrined in their constitution in 1975. According to the Wyoming Taxpayers Association, the Fund has paid $3.2 billion into the state’s general fund between 1975 and 2012. Unlike Alaska which pays taxpayers directly from their Fund, Wyoming is using the proceeds from their Fund to keep other taxes low—North Dakota should take note.
Additionally, much of the severance tax burden is actually “exported” to the other 49 states. The tax burden analysis published by the Tax Foundation adjusts for this impact and ranks Wyoming as the fifth lowest in the country with a tax burden of 7.8 percent.
Overall, Wyoming’s fourth highest in the nation tax burden needs to be put into proper context due to the extreme tax collections from their severance tax. Wyoming’s true tax burden on the average taxpayer is much, much lighter.
J. Scott Moody has over 18 years as a public policy economist with a specialty in tax policy and has over 180 publications. He has worked for numerous national and state-based think tanks such as Federalism In Action, Tax Foundation, Heritage Foundation, and The Maine Heritage Policy Center.