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Wyoming Repeals Sales Tax on Food

2 min readBy: Alicia Hansen

The Wyoming legislature adjourned earlier this month after approving a $3.4 billion budget and removing the sales tax on food for the next two years. The state is enjoying a budget surplus, and legislators debated various taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. relief plans, including proposals to increase tax refunds to the elderly and disabled, lower the sales tax, cut the property tax, repeal the sales tax on both food and utilities, give tax exemptions to companies that build coal gasification or liquefaction plants in the state, and—surprising during a budget surplus—increase the cigarette tax by 40 cents a pack.

The food tax repeal was preceded by a two-week debate over the proper recipients of tax relief, the appropriate tax baseThe tax base is the total amount of income, property, assets, consumption, transactions, or other economic activity subject to taxation by a tax authority. A narrow tax base is non-neutral and inefficient. A broad tax base reduces tax administration costs and allows more revenue to be raised at lower rates. , and the effects of taxes on behavior. The discussion touched on some of the Tax Foundation’s principles of sound tax policy, and revealed that many Wyoming legislators have a good grasp of sound tax policy, while others don’t understand that tax bases should be broad and rates low; that taxes should be used to raise revenue, not control behavior; and that individual taxpayers, not businesses, pay taxes.

Some highlights, from the Billings Gazette:

One representative, failing to recognize that businesses pass taxes on to consumers, employees, and shareholders, said more than 70 percent of the proceeds from the plan to repeal the sales tax would go to businesses.

“I prefer the [repeal of the] food tax because it almost all goes to the people,” she said.

The chairman of the Revenue Committee urged the House to reject the plan to repeal sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. on food and utilities, calling the proposal “a boondoggle that would lower the state’s tax base.”

One proponent of the food tax repeal, confusing a broad tax base with a broad tax cut, said property tax reduction should be rejected because it wouldn’t help renters: “This [food tax repeal] is really the only way that we can put money back into the pocket of the average citizen ….”

Debating a proposal to increase the cigarette tax, one representative implored repeatedly, “What if we help just one [smoker]?” Rep. Keith Gingery, adding a voice of reason to the debate, said “I disagree with using tax policy as a way of influencing citizens,” and Rep. Jack Landon added, “I don’t want to be social engineering through taxation.”