In his latest pitch to eliminate the state’s income tax, Gov. Paul LePage highlighted his “favorite state” — Wyoming — as an example of the path to prosperity.
The Cowboy State, twice Maine’s size with half the population, has higher per-capita incomes, lower energy costs and money in the bank, LePage said during a town hall meeting on Tuesday in Lewiston. Wyoming’s economy depends on agriculture and tourism, the governor erroneously said, while acknowledging that the state does have more natural resources it can tap than Maine, namely coal.
Those natural resources actually account for about a third of Wyoming’s economic activity. Tourism and agriculture are not among the state’s top industries.
Wyoming doesn’t just have more coal than Maine, it has more coal than any other state. In fact, unlike Maine, Wyoming has huge mineral wealth. It is the country’s largest producer of coal, producing 39 percent of the country’s total supply in 2013. Wyoming also was fifth in natural gas production in 2014. And it has reserves of oil, methane, diamonds and other minerals.
As a result, Wyoming can tax this wealth instead of its people.
A severance tax assessed on the value of nonrenewable resources extracted from Wyoming brought $959.7 million into the state coffers in the 2014 fiscal year, the third highest amount on record, according to the state’s Consensus Revenue Estimating Group. This revenue was roughly split in half between the state’s General Fund and a budget reserve account.
The state also expected to receive nearly $740 million in federal mining royalties, which go into the reserve account.
The largest single source of revenue in Wyoming is its sales and use tax — mostly paid by mining operations. Sales and use taxes account for nearly half the state’s general fund revenue.
The third largest revenue source, interest from the Permanent Wyoming Mineral Trust Fund, is also the result of Wyoming’s mining activity. And some revenue from oil and gas lease payments is directed into a fund to support Wyoming schools.
More than half of Wyoming’s property taxes come from mineral extraction operations, which are taxed at 100 percent of their fair market value, compared with a 9.5 percent assessment on personal property. Nearly 70 percent of property taxes go toward funding the state’s schools.
It’s no surprise that several of the states that have no personal income tax and that LePage often cites as examples for Maine — Texas, South Dakota and Alaska — have mineral wealth to tax instead of residents’ income. Oil, gas and mining companies flock to these states because that’s where these resources are, not because the tax rates are low.
Likewise, people move to these states often to work energy industry-related jobs — jobs that are dependent on the natural resources to be extracted, not the state’s tax structure as LePage would have all of us believe.
Maine had localized examples of these types of economies when the timber industry and mill towns were booming. When a mill paid the majority of a town’s taxes — and employed most of its residents — there was money for new uniforms for the sports teams and granite-curbed sidewalks. When the mills asked for tax abatements and then closed, local residents were left to foot the bill.
LePage told the Lewiston audience that state law prevents us from looking to see if there is coal under Maine’s rocks. Since the nearest coal mine is hundreds of miles away and Maine isn’t even on a list of actual or potential coal-producing states maintained by the federal Energy Information Administration, it is probably safe to assume there is not.
That leaves Maine’s residents, businesses and visitors to foot the bill for services ranging from education to road repair. If Maine eliminated its income tax, it would have to dramatically reduce government services or significantly raise other taxes, such as sales and property taxes.
That is as realistic a path to prosperity as looking for coal under Maine’s rocks.
