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Wyoming Mulls Income Bill

March 21, 2000

CHEYENNE, Wyo. (AP) _ Bill McIlvain watched in amazement last month as Wyoming lawmakers debated whether to draft a bill implementing the state’s first income tax.

The proposed budget bill amendment narrowly failed in a 34-25 vote, but McIlvain, a former state legislator, saw the discussion as ``landmark.″

Wyoming is one of six states with no tax on any personal income. The others are Alaska, Nevada, South Dakota, Texas and Washington. New Hampshire and Tennessee have no income tax as such, but residents pay tax on certain stock dividends and interest.

``I was afraid to even mention the words ‘income tax’ for fear I’d be voted out of office,″ said McIlvain, who was re-elected eight times before retiring as House speaker in 1990.

Times have changed in Wyoming, which began the year facing a budget shortfall during unprecedented nationwide prosperity.

Shortly after McIlvain entered office in 1969, Wyoming’s mining industry boomed, led by coal, oil, natural gas and uranium production.

The new tax dollars fueled a legislative spending spree. Government costs soared to $1.7 billion in 1985, an increase of 650 percent over 1969 levels. By comparison, consumer prices rose 193 percent over the same period.

Legislators did not spend all the new dollars. A portion of mining taxes now flow to a trust fund, which has grown to $1.5 billion, and only the interest is spent.

But the trust fund income, and increased collections from sales and property taxes, are not offsetting a decline in mineral revenue.

The mineral industry, which Wyoming has become very dependent upon, has fallen on hard times. The taxable value of minerals last year was $3.4 billion, down from a record $6 billion in 1984.

Bright spots have been natural gas and coal, which set a production record last year despite prices at less than half their 1982 peak.

Still, lawmakers have been reluctant to impose substantial new taxes for fear of upsetting the balance between a healthy industry and a crippled one.

``It’s a policy question,″ state senior economist Jim Robinson said. ``How close can we get to that point? We don’t know where that point is, where coal companies say, ’We’ve had enough. That’s it. We’re leaving.‴

Although legislators are wrestling with maintaining the higher government spending, it was justified, Wyoming Taxpayers Association Director Michael Walden-Newman said.

``We had a lot of pent-up needs,″ he said. ``We took that mineral money and as it came in we spent it on things this state needed for years. We paved roads in towns that had dirt roads before. We built school buildings. We built hospitals. We built improved public structures throughout the state.″

To make up decade-long shortfalls, lawmakers spent reserves, which are nearly depleted. Meanwhile, other pressures have mounted, including a rapidly rising prison population and court-driven increases in education spending, up 15 percent from 1996.

During this year’s legislative session, which ended last week, vigorous debate ensued over several tax ideas, from a sales tax on a wide range of services to taxes on bingo contests.

But as the session progressed, oil prices continued to climb, adding to the coffers and removing pressure to find significant new revenue.

``The fact is that oil saved the day and Band-Aids could be put on for a few more years,″ Sen. Keith Goodenough said.

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On The Net: Wyoming State Legislature: http://legisweb.state.wy.us/

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