What is the best way for Wyoming to address property taxes?

This November, Wyoming voters will consider Initiative 1. That proposal would exempt half of a property’s assessed value from taxes for those who reside at the property for at least six months per year. The homeowner would also have to have lived in Wyoming for a year to be eligible for the exemption. Land is excluded from the exemption.

Adoption of the statute means that second-home owners, those with rental property and those who spend less than six months in Wyoming each year will be treated differently than homeowners who spend the majority of their time in the state. The certified ballot language from Secretary of State Chuck Gray estimates government revenue reductions for the state of $92.6 million in fiscal year 2028 and $95.9 million in fiscal year 2029 if it passes. In June, the Wyoming Department of Revenue told a state legislative committee that its independent analysis showed revenue for state and local government entities could be reduced as much as $124.7 million in fiscal year 2028 if it passed.

With reduced property tax revenue, local governments would have to either cut spending or find a replacement source of revenue to pay for schools, roads and other essential services. Many have talked about raising the sales tax as an alternative. Wyoming does not have an income tax, so raising it is not an option.

Currently, Wyoming’s state sales tax is 4 percent. With the addition of local county rates, the average rate ranges between 5 and 6 percent throughout the state, with the highest found in Teton County and the two resort districts within its borders.

Tax Foundation research shows that substituting a higher sales tax for property taxes would require significantly higher state and county rates, would change taxpayer behavior in border areas, would hurt lower income people and erode local control of tax dollars. A recent Tax Foundation study of how eliminating the property tax in Florida would impact the state found that the Sunshine State would have to hike the sales tax to 15.34 percent to cover the loss, up from no more than the current 8 percent depending on the county.

Higher sales tax rates no doubt will change taxpayer behavior, especially those in border regions who can cross state lines to find lower prices. This can not only hurt local restaurants, grocery stores and other retail businesses, but those on fixed income and lower-income individuals who spend a higher percentage of their money on purchases. It could also impact overall tax collected as people strive to save money wherever possible.

Lastly, moving from a property tax to a sales tax would mean shifting control of local tax dollars from local elected officials to Cheyenne.

Rising home values and assessments have justifiably concerned many taxpayers, especially the elderly on a fixed income or those of any age who struggle to make ends meet.

While calls for scrapping the property tax are understandable, studies show the alternative—moving to a higher sales or income tax— will hurt the economy and job growth, provide inadequate funding, and generate animosity between municipalities.

An alternative property tax reform could instead focus on enacting levy limits to limit collections to the prior year’s plus inflation and population growth and providing more transparency on the impact spending has on property taxes. This would shift the focus from assessments to the revenue needed to effectively run local government. To aid lower-income people of all ages, policymakers could also pass what are known as circuit breakers. Generally, there are two types. One offers relief when property taxes surpass a certain income percentage; the other basis discounts on a “sliding scale” of different income levels.

When paired with a reform known as Truth in Taxation, residents would be able to meaningfully constrain their property tax bills. These laws require local governments to advertise proposed property tax increases with detailed information and adequate time for public input and comment.

Property taxes supply 84 percent of local government revenue in Wyoming compared to 72 percent nationally. Reducing them in half as proposed by Initiative 1 could require a massive hike in the sales tax in order to fund core government services including roads, schools, libraries and other infrastructure.

As an alternative, the legislature could instead consider adopting levy limits, Truth in Taxation and circuit breakers to both provide transparency and consistency and help lower-income residents. Property taxes have been shown to be the most reliable funding source for local governments and the one that maintains local control over local resources.

Rapidly increasing property tax bills are a real concern. The question is which property tax reforms offer the best path to foster fairness, stability, transparency, and fiscal restraint.