Governor pleased with passage of property tax amendment

SHERIDAN — Gov. Mark Gordon said on Wednesday that state agencies may have to “limit services” following voter approval of a constitutional amendment that allows lawmakers, if they so choose, to create a separate residential property tax class.

He also said he was “pleased” the amendment passed in Tuesday’s General Election.

“It was a good election, by all accounts here in Wyoming. Things turned out well,” Gordon said on Wednesday morning. “I am particularly happy about the Amendment A passage. I wasn’t sure it was going to pass. It is a difficult task to get any (constitutional) amendment passed, largely because you have to have 51% of people who voted in the election (vote in favor).”

Constitutional Amendment A allows lawmakers the option to create a fourth residential tier in the state’s property tax structure, which could be assessed at a different rate than commercial properties.

Currently, commercial and residential properties are in the same category for taxation purposes.

“The easiest way to explain this is that (without the constitutional amendment) we can’t give grandma a break on her taxes unless we give the same break to Walmart,” Laurie Urbigkit with the Wyoming Realtors Association said before the election.

Her organization ran a campaign in favor of the amendment, but Urbigkit was not available for comment Wednesday.

Wyoming currently separates property taxation into three tiers: one for mineral production taxed at 100%; a second for industrial real and personal property at 11.5%; and a third containing all other property, including commercial real and personal property, residential real and personal property which includes titled manufactured homes and agricultural land that is in production at 9.5%.

The legislature determines the level of assessment for each category, and following passage of the constitutional amendment, will be able to do so for a potential fourth class.

Fifty-four percent of votes cast in Tuesday’s election were in favor of the amendment, for a total of 146,300 votes. Thirty-seven percent, or 100,375 voters, were against the amendment. The measure needed 133,522 votes in the affirmative to pass, meaning the measure passed by four points.

Property tax makes up an overwhelming majority of local government budgets, Manish Bhatt, a senior policy analyst with the Center for State Tax Policy at the Tax Foundation, explained Wednesday after the amendment passed. Because of inflation, taxpayers have seen their property taxes rise, but that does not always translate to higher local government collections. Those, Bhatt said, are actually falling.

“It is in this context that Wyoming, a state that I love, has decided to afford voters the opportunity to split the tax roles even further. Carving residential (taxes) out as its own category further splits the roles, and introduces distortions in the market. What it could cause (is) a shift in where property tax revenue derives from,” Bhatt said.

Lower tax rates on residential homeowners means the revenue burden will have to be shifted to other classes of property.

“Oftentimes we see this falling onto other places, disproportionately on commercial properties which includes small businesses,” Bhatt said.

Gordon, however, said any changes undertaken by lawmakers might lead to less government services.

During the 2024 Budget Session, lawmakers often debated the question of “backfill,” or a mechanism for making up lost revenue from tax cuts to fund agencies across the state. When asked if he would urge lawmakers to come up with a mechanism for making up lost revenue if lawmakers approve a reduction in the percentage of property tax applied to homeowners vs. commercial properties, Gordon acknowledged property tax is an important source of funding for local communities.

“It is the way we fund our schools, it is the way we fund our fire departments, etc.,” Gordon said. “There have also been a lot of people who have figured out ways, under the existing system, to sort of find avenues to be able to develop commercial properties at a residential rate.”

The amendment will give the legislature the opportunity to lower taxes on residents only, he said.

“We are going to have to figure out ways to make up the difference. Some of that is going to come from limiting services to a degree, but it is obviously efficiency that we have to work on,” Gordon said. “Other parts of that are going to have to come from state collections, and that question is going to be something that we have to work out over time.”

The amendment also allows the lawmakers the opportunity to split tax roles even further, creating an owner-occupied primary residence subclass within the residential property class. Bhatt said there are “definitional issues” remaining, and that the amendment passed this week is not necessarily a “mandate as much as an opportunity for the legislature to consider these opportunities.”

“(If) I were speaking to lawmakers, I would encourage them to really think through the complete ramifications of what further splitting the roles would do, and whether it creates an undue burden or shift to other classes of property,” he said.

An owner-occupied subclass might impact renters, he continued.

“If you have an owner-occupied primary residence and right next door, you have a very similar property that is rented, you could in fact see your rental unit paying more property taxes than the owner-occupied solely by virtue of who is living in the house,” Bhatt said.

Those residents, he said, would not be using disproportionately more services, but the tax bill on them could be higher, as well as their rental payment.

“Where we are shifting the burden to, who is picking up the tab, these are real issues that need to be worked out. I am confident the lawmakers will take these issues into consideration,” he said.

Gordon said he believes the amendment — and continued property tax reform to be undertaken by lawmakers in the upcoming General Session convening on Jan. 14, 2025 — could make a real difference for Wyoming residents.

“Property taxes have increased over the last several years, and there have been a lot of people that have been affected by it,” Gordon said. “What I am really excited about is the property tax reform. … Amendment A gives the legislature a real chance to look at lasting, constitutionally proper and correct changes that will benefit … residential property ownership.”

Gordon plans to work closely with newly-elected state leaders “on long-lasting, constitutionally-correct property tax reform,” he said.

He also noted more than 40% of incoming lawmakers for the 2025 General Session will have fewer than two years experience.

“That will mean this session is going to have a lot of learning for legislators to do, to understand the process,” Gordon said, adding he will urge the legislature to look carefully at reducing residential property tax rates.

His hope is Wyoming residents benefit from the changes, as opposed to commercial property owners who come into Wyoming to develop “property to be rented.”

“I want our tax system to be more balanced and appropriate for the people across the board, and of course we are going to have to work on making sure that we have the resources necessary at the state level,” Gordon said. “That is a big conversation for the legislature.”

This story was published on November 7, 2024.