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Research & Commentary: Bad Corporate Tax Proposal Gets Worse in Wyoming

September 11, 2019

In this Research & Commentary, Matthew Glans examines a proposed new corporate income tax in Wyoming that would have a dramatic and negative effect on Wyoming businesses.

Despite a competitive tax system and business climate, Wyoming lawmakers introduced an updated version of a bill that would impose a new 7 percent tax on businesses. The original version, rejected earlier this year, was known as The National Retail Fairness Act. The new version has been renamed by its sponsor as the National Corporate Tax Recapture Act.

This bill, like its predecessor, is intended to “bring money back into Wyoming.” The new version would expand the scope of businesses covered by the tax. The original version would have only taxed a few industries, such as food service, retail operations, and large hotels. The new version would tax any business in Wyoming that has more than 100 shareholders.

According to the Wyoming Liberty Group, a 7 percent tax would have a dramatic effect on Wyoming businesses. “For companies with a nationwide pricing model such as Walmart, this would mean cutting employee hours or raising product prices. A previous analysis looked at the impact to jobs at Walmart stores in Wyoming and found that the taxes paid per store would be about $280,000. This would amount to $3.9 million for the 12 Walmart and 2 Sam's Club stores in the state. In order to absorb the costs from this tax, Walmart would have to cut about 154 full-time workers in Wyoming,” the group wrote in a July 2019 article.

Personal and corporate income taxes are generally considered to be the most destructive taxes because they disincentivize production, innovation, and risk-taking. Recent studies show states with no income tax or with lower income taxes perform better economically and achieve greater job and population growth than those with higher income taxes. High income taxes deter economic development by discouraging productive individuals from moving into a state, remaining there, or investing their money. A study by the Americans for Tax Reform Foundation found, “Each positive 1 percentage point tax burden differential between states decreases the ratio of income migration into the high-tax state by 6.78 percent in a given year.”

Income taxes impose high costs on businesses and individuals. Furthermore, they discourage capital from flowing into a state and thwart job creation. The new tax would create an added burden for most large, publicly traded companies. Moreover, because private companies rarely have more than 100 shareholders, this would create an artificial competitive advantage.

Wyoming legislators should reject any and all income taxes. Instead, they should preserve the state’s economic competitiveness by allowing residents and businesses to spend, save, and invest their money as they see best. Additionally, the state should consider reducing government spending and loosening burdensome regulations.

The following articles examine state income tax reform from multiple perspectives.
 

The Corporate Income Tax on The Table in Wyoming & Misconceptions About the "Throwback" Rule
https://wyliberty.org/blog/economic/about-the-corporate-income-tax-on-the-table-in-wyoming-misconceptions-about-the-throwback-rule
In this article, the Wyoming Liberty Group examines the proposed corporate income tax, how it is designed based on misconceptions about corporate taxes, and why it would slow economic growth in the state.

Ten Principles of State Fiscal Policy 
https://www.heartland.org/publications-resources/publications/ten-principles-of-state-fiscal-policy?source=policybot
The Heartland Institute provides policymakers and civic and business leaders a highly condensed, easy-to-read guide to state fiscal policy principles. The principles range from “Above all else: Keep taxes low” to “Protect state employees from politics.”

Federal Tax Reform: The Impact on States
https://taxfoundation.org/federal-tax-reform-the-impact-on-states/
Nicole Kaeding and Kyle Pomerleau of the Tax Foundation examine the effects of the federal tax reform on the states and how they can use the changes to push for tax reforms of their own.

Tax Reform Moves to the States: State Revenue Implications and Reform Opportunities Following Federal Tax Reform
https://taxfoundation.org/state-conformity-federal-tax-reform/#9
This paper by Jared Walczak of the Tax Foundation discusses what options are available to states as they respond to federal tax changes. “In the wake of federal tax reform, states have a golden opportunity to move their own tax codes in a more simple, neutral, and pro-growth direction,” writes Walczak.

Tip Sheet: State Income Tax Reform 
http://heartland.org/policy-documents/tip-sheet-state-income-tax-reform
This Policy Tip Sheet from The Heartland Institute examines state income taxes, documents economists’ judgment of them as the most destructive tax and a deterrent to economic development, and provides data showing states with no income tax perform better economically and enjoy greater job and population growth than those with higher taxes.

Taxing the Rich Will Bankrupt Your State
https://www.heartland.org/publications-resources/publications/taxing-the-rich-will-bankrupt-your-state
John Nothdurft explains the disadvantages and negative consequences of “millionaire” taxes and overtaxing the top income brackets.

Should We Raise Taxes on the Rich?
http://spectator.org/archives/2012/11/14/should-we-raise-taxes-on-the-r
Peter Ferrara, senior fellow for entitlement and budget policy at The Heartland Institute, writes in the American Spectator about “taxing the rich” and explains why such policies make no fiscal sense.

Seven Myths About Taxing the Rich
https://www.heritage.org/taxes/report/seven-myths-about-taxing-the-rich 
Curtis S. Dubay of The Heritage Foundation considers seven commonly cited myths about policies to tax the rich. Dubay argues raising taxes on the rich would increase the progressivity of an already highly progressive tax code. It also would damage economic growth by stifling job creation, further slowing already stagnant wage growth. Although some see raising taxes on the rich as a silver bullet for fiscal woes, it actually badly damages the economy, he writes.

Rich States, Poor States
https://www.richstatespoorstates.org/
The twelfth edition of this publication from the American Legislative Exchange Council and authors Arthur Laffer, Stephen Moore, and Jonathan Williams offers both individual-state and comparative accounts of the negative effects of income taxes.

The Historical Lessons of Lower Tax Rates
http://www.heritage.org/research/reports/2003/08/the-historical-lessons-of-lower-tax-rates  
Examining the historical results of income tax cuts, Daniel Mitchell of the Heritage Foundation finds a distinct pattern throughout American history: When tax rates are reduced, the economy's growth rate improves and living standards increase.

The U.S. Tax System: Who Really Pays?
https://www.manhattan-institute.org/html/us-tax-system-who-really-pays-5748.html
Writing for the Manhattan Institute, Stephen Moore examines popular conceptions and misconceptions about the impact of tax rates on economic productivity and fairness, addressing these statements and debunking attendant myths. He provides useful information on how the rich are taxed and how much they contribute.

The Historical Lessons of Lower Tax Rates
http://www.heritage.org/research/reports/2003/08/the-historical-lessons-of-lower-tax-rates  
Examining the historical results of income tax cuts, Daniel Mitchell of the Heritage Foundation finds a distinct pattern throughout American history: When tax rates are reduced, the economy's growth rate improves and living standards increase.

Policy Tip Sheet: Corporate Income Taxes
http://heartland.org/policy-documents/policy-tip-sheet-corporate-income-taxes
Taylor Smith examines corporate income taxes and their effects on economic development. Smith suggests how legislators can limit or eliminate their corporate taxes.

Balancing State Budgets the Smart Way
http://taxfoundation.org/article/balancing-state-budgets-smart-way
Joseph Henchman of the Tax Foundation examines an array of options states can use to remedy both short-term and long-term fiscal woes and put their budgets back on sounder legal footing.

 

Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this and other topics, visit the Budget & Tax News website, The Heartland Institute’s website, and PolicyBot, Heartland’s free online research database.

The Heartland Institute can send an expert to your state to testify or brief your caucus; host an event in your state, or send you further information on a topic. Please don’t hesitate to contact us if we can be of assistance! If you have any questions or comments, contact Lennie Jarratt, Heartland’s government relations manager, at ljarratt@heartland.org or 312/377-4000.

Author
Matthew Glans joined the staff of The Heartland Institute in November 2007 as legislative specialist for insurance and finance. In 2012, Glans was named senior policy analyst.
mglans@heartland.org @HeartlandGR