Wyoming legislators are taking a second look at a proposal to impose a corporate income tax on companies with more than 100 shareholders.
The state legislature declined to pass a proposed corporate income tax bill limited to retailers, restaurants, and hotels during the session earlier this year. However, the Joint Revenue Interim Committee, which meets between sessions of the legislature, approved a draft bill for a broader corporate tax called the National Corporate Tax Recapture Act, at a meeting in Pinedale, Wyoming on September 19.
The new bill would tax every corporation with more than 100 shareholders operating in the state. The bill could be considered during the next session of the legislature beginning in February 2020.
‘It Is a Real Increase’
It is unlikely the “recapture” tax would work as proposed, says Sven Larsen, a senior fellow at the Wyoming Liberty Group.
“Contrary to what is often being said, the corporate tax you are looking at is not a simple transfer of revenue from one state to another,” Larsen wrote in a September 17 open letter to the state legislature’s Revenue Committee. “It is a real increase in the tax burden on corporations.”
Corporations look at the cost of doing business before entering a new market, Larsen told the committee.
“For example, home improvement retail giant Lowe’s, domiciled in North Carolina where the corporate income tax is 2.5 percent, would be looking at a substantial increase in the cost of operations in our state.”
Small Differences, Large Effects
States should not impose corporate income taxes, says Chris Edwards, director of tax policy at the Cato Institute.
“In today’s competitive global economy, businesses have to choose where to locate, and small differences in tax rates can have a large effect on investment,” Edwards said.
Raising the tax burden on corporations would make things worse for workers in the state, Edwards says.
“With a higher corporate tax and lower investment, Wyoming’s workers would lose,” Edwards said. “Less investment would mean less demand for workers, and thus lower wages and fewer job prospects. Corporate taxes are also undemocratic in the sense that they are a hidden burden that politicians ultimately foist on workers, who may be unaware of them.”
Bonner R. Cohen, Ph.D. ([email protected]) is a senior fellow at the National Center for Public Policy Research.
Internet Info:
Matthew Glans, “Research and Commentary: Bad Corporate Tax Proposal Gets Worse in Wyoming,” The Heartland Institute, September 11, 2019: https://heartland.org/publications-resources/publications/research–commentary-bad-corporate-tax-proposal-gets-worse-in-wyoming
Bonner R. Cohen is a senior fellow with the National Center for Public Policy Research, a position he has held since 2002.
