A History of the Wyoming Sales Tax and How Lawmakers Chose it from Among Severance Taxes, an Income Tax, Gambling, and a Lottery

Abstract

Property taxes were the bedrock of the tax system in Wyoming from the beginning of the territory. Policy makers attempted to diversify taxation sources, starting with efforts in the Constitutional Convention of 1889 to adopt a severance tax on coal production. The delegates initially authorized such a tax, but the measure was quickly reversed under heavy lobbying from the Union Pacific Railroad, the major owner of coal mines in Wyoming at the time and the largest property owner. During the agricultural depression of the early 1920s, Wyoming Gov. William Ross, a Democrat from Cheyenne, gained sufficient legislative support, for a constitutional amendment for a severance tax. The constitutional amendment appeared on the ballot in 1924. Halfway through his term, just a month before the 1924 general election, Ross died. The severance tax amendment, the center of voter attention prior to his death, was overshadowed by the eventual election of Ross' widow, Nellie Tayloe Ross, to the governorship - the first woman in America ever elected to that office. Meanwhile, the severance tax measure, for which William Ross had campaigned so strenuously, lost by a narrow margin. His widow and her successors in the governorship did not press for a severance tax.

During the early 1930s, Wyoming state government as well as cities and counties once again were overwhelmed with financial needs that could not be satisfied by collection of property taxes alone. Consequently, the 1933 Wyoming legislature debated whether or not to adopt an income tax. Many surrounding states adopted the income tax at the time, including Utah and Idaho. Even though the "agricultural bloc" in both houses of the Wyoming legislature, in concert with the few legislators representing organized labor, supported an income tax. Business interests and professionals, however, oppose an income tax and the 1933 legislature, even with a special session, failed to come up with an alternative to property taxes. A measure that would have legalized all forms of gambling passed both Houses, but met with a gubernatorial veto after the session closed. By 1935, Democratic Gov. Leslie Miller sided with proponents of a "temporary emergency sales tax" that would get the state through the depression times. The measure, set at two percent with numerous exemptions included in the law, gained wide support even though a small minority of agriculturalists still favored an income tax. Aimed not only at alleviating budget woes in state government, the sales tax helped cities and counties, burdened by welfare costs associated with a 25 percent unemployment rate throughout much of the state. In 1937, when the measure came up once again for legislative authorization, "temporary emergency" was left out of the title of the legislation. The sales tax became the primary source of state funding until 1969 when the legislature authorized a severance tax on minerals. Since then, Wyoming's tax revenues rely heavily on severance taxes and sales taxes. Today, it remains one of the few states not having an income tax, but also one of the few with a budget surplus in 2004.