On Feb. 10, the Wyoming Legislature will convene for its biannual budget session to hammer out the budget with even less revenue than anticipated. Word came last week from the state’s Consensus Revenue Estimating Group that the Legislature will have roughly $72 million less to work with this biennium than previously projected. The decline in revenue is largely attributable to a drop in natural gas prices.
When the state’s revenue picture looked bleak in 2016, the common refrain was that Wyoming simply needed to tighten its belt and wait for the next boom.
Four years into an energy bust, that refrain feels a little tired. As Gov. Mark Gordon wrote in his budget, “cynics may suggest that Wyoming is accustomed to boom and bust cycles and we need only wait for the markets to turn around. This time though, we may well be experiencing a more fundamental change.”
Perhaps there is yet more tightening to be done, and Gordon was right to ask all state departments to scrutinize their budgets for savings. But it’s also time for a reckoning: Residents will now have to pay for some of the services that we’ve long relied on energy to pay for.
For the past three years or more, the Joint Revenue Interim Committee has discussed revenue-generating ideas – an increased cigarette tax, an increased alcohol tax and a tourism tax. So far, all those measures have failed.
At 60 cents per pack, Wyoming’s excise tax per pack of cigarettes is the eighth-lowest in the nation. Five of the seven states with a lower per-pack excise tax are tobacco-growing states with strong tobacco lobbies. But in Wyoming, it’s hard to understand why legislators couldn’t be persuaded to raise the tax.
In 2009, $258 million was spent on direct medical care for smokers in Wyoming. The American Journal of Preventive Medicine found that taxpayers bear 60% of the cost of smoking-attributable diseases through programs such as Medicare and Medicaid. Despite declines in the rates of smoking in recent years, the costs on society due to smoking have actually increased.
What’s more, increased taxes incentivize smokers to quit. And, increased prices for tobacco are the best deterrent to youth beginning to smoke, according to the World Health Organization.
Last month, members of the Legislature’s Labor, Health and Human Services Committee voted down a proposed increase to the malt beverage tax – a tax that hasn’t increased since 1935. The 2 cents per gallon tax on beer is the lowest in the nation. The median beer tax rate is 26 cents per gallon.
In the past, legislators have posited that if Wyoming were to raise its beer tax, residents would simply cross state lines to buy their beer more cheaply. It’s hard to imagine that this is a real-world scenario, since every state that borders Wyoming has a higher beer tax rate.
Like tobacco, there seems to be a deep disconnect between the costs the state incurs from this market and the taxes we levy to help cover those costs.
According to a 2010 study from the Wyoming Survey and Analysis Center, the annual direct cost of the services we provide that are associated with alcohol abuse – treatment centers, law enforcement, court costs and emergency services – is $27.3 million. Currently, the state generates about $265,000 annually from the beer tax. Certainly, the state could recoup more of those costs by increasing the tax rates on the problem substances.
And there is overwhelming evidence dating back years that shows that higher alcohol taxes reduce drinking and excessive drinking in particular.
Voting to increase taxes on alcohol and tobacco doesn’t mean you’re pro-taxes, it means you believe people should pay for the public services they are likely to utilize.
This is incredibly low-hanging fruit, and legislators would do well to pick it.