In Fiscal Year (FY) 2016, Wyoming collected $3.3 billion in state and local taxes—or $5,696 for every man, woman, and child. 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?
To better answer this question, this analysis will calculate Wyoming’s tax burden relative to the private sector. Ultimately, it is the private sector that creates new wealth and income. A high tax burden means a state is hobbling its private sector relative to other states and reducing their long-run economic growth potential.
As shown in Chart 1, Wyoming’s state and local tax burden (tax collections divided by private sector personal income) was the twentieth highest in the nation for FY 2016 at 14.4 percent—or 1 percent above the national average of 14.3 percent.
#Wyoming state and local #taxburden in FY 2016 was the 20th highest in the nation at 14.4%— 1% above US average of 14.3% http://bit.ly/2FX9C8F @keypolicydata #WYpol #WYleg #WYsen #WYgov #PolicyData (click to tweet)
As shown in Chart 2, Wyoming’s tax burden has increased over time by 70 percent to 14.4 percent in FY 2016 from 8.5 percent in FY 1950.
To put Wyoming’s tax burden into perspective, let’s compare it to size of major industries in the state (as a percent of private sector income). As shown in Chart 3, Wyoming’s 14.9 percent tax burden is greater than these combined industries: construction (7.9 percent), manufacturing (3.7 percent), and utilities (1.4 percent).
Wyoming’s higher than average tax burden is driven by a high property tax burden (6.1 percent, 7th highest) and a high all other taxes burden (4.5 percent, 5th highest). However, this is partially offset because Wyoming does not have a state individual or corporate income tax.
Wyoming’s high all other taxes burden is driven by severance taxes on oil, gas, and coal which 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 essentially pay for not having an individual or corporate income tax.
Additionally, as noted above, 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 lowest in the country with a tax burden of 6.9 percent.
Yet, while “tax exporting” is an important economic consideration, policymakers need to be aware of the size of tax collections relative to the private sector economy. Tax exporting may mean lower tax burdens in the short-run, but tax exporting is not a costless transaction as it creates distortions in the economy in the long-run. As such, tax burdens estimates shown here at Key Policy Data and those published by the Tax Foundation are both useful to policymakers.
Of course, the tax burdens for local government can vary just as much as they do among the 50 states. As such, we have also calculated the local government tax burden for every county in Wyoming—this includes every taxing jurisdiction within the geographic county borders whether it is a city, a special district, or county government itself.
Wyoming has 23 counties and their local government tax burden are shown below (from highest to lowest):
Finally, don’t forget to watch our exclusive time-lapse video of state and local tax burdens over the last 66 years! See if your state has been above or below the national average?
Scott has nearly 20 years of experience as a public policy economist. He is the author, co-author and editor of over 180 studies and books. His professional experience also includes positions at the American Conservative Union Foundation, Granite Institute, Federalism In Action, Maine Heritage Policy Center, Tax Foundation, and Heritage Foundation.