In February 1969, Wyoming Governor Stan Hathaway took pen in hand to enact a 1% severance tax rate on all mineral production. Wyoming had levied no severance taxes on minerals from the time of statehood in 1890 until that time. Legislative rumblings for a severance tax had occurred in past years, most significantly in 1889 and 1924, but with no results.
Why 1969? The drumbeat for a severance tax began with the 1966 gubernatorial contest between Hathaway, a Republican, and his Democratic opponent Ernest Wilkerson. Campaigning with the slogan, “Wyoming’s Wealth for Wyoming’s People,” Wilkerson referred to “the quiet siphoning of Wyoming’s wealth” and foresaw the potential of mineral/energy development in the state.
During the campaign, Democrats proposed measures that included a tax on crude oil exported from Wyoming; a preferential assignment of state mineral leases to companies processing their product in Wyoming; a severance tax, with revenue earmarked to permanent funds and investments for education and other governmental functions; and a study of taxing minerals-in-place as a means of stimulating production.
As for Hathaway, he judged the idea behind the study as unconstitutional and just ignored the rest of the ideas. But as T.A. Larson notes in his History of Wyoming (p. 563), “In 1969 the pressure for a severance tax became so great that one per cent had to be conceded. State government had to have more revenue, and the alternatives, higher sales tax or an income tax, were even more dangerous politically. Some observers suggested that Ernest Wilkerson’s advocacy of severance taxation in 1966 had educated the public and made severance taxation possible.”
Besides, at this time Wyoming’s economy was still largely tied to agriculture, and it just wasn’t paying the bills. As the story goes, Hathaway found $80 in the general fund and figured he better act before the state went completely broke.
Soon after the tax was enacted, the national energy crisis of the 1970s spurred oil drilling that triggered a massive and memorable Wyoming boom. Wyoming was transferred from the Cowboy State into the Energy State. By the time Hathaway retired in 1974, he had also overseen establishment of the Permanent Mineral Trust Fund to hold a percentage of severance tax revenues inviolate.
Wyoming became reliant on mineral revenues for a significant part of its budget—a situation that has proved to be both a blessing and a curse. In one of his last interviews before he died in 2005, Hathaway told journalist Sam Western: “I passed the first severance tax. I got the Permanent Mineral Trust Fund, and they’ve carried Wyoming’s expenses very well.” But, he added, it bothered him that most people in Wyoming believed they were getting “a free ride.” “The truth is,” he said, “we all should pay our share of government costs.”
Learn more in the Stanley K. Hathaway papers at the American Heritage Center.
Post contributed by AHC Simpson Archivist Leslie Waggener.