A bill that would tax unearned income to raise money for education has been filed for the 2021 session of the Wyoming Legislature.

You can read House Bill 138 here. It is sponsored by Representative(s) Schwartz, Connolly and Zwonitzer and Senator(s) Kost and Rothfuss.

The Internal Revenue Service defines unearned income as follows: "Unearned income includes investment-type income such as taxable interest, ordinary dividends, and capital gain distributions. It also includes unemployment compensation, taxable social security benefits, pensions, annuities, cancellation of debt, and distributions of unearned income from a trust."

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The bill defines the income to be taxed this way:

(vi)  "Unearned income" means income other than earned income and includes interest, dividends and capital gains including capital gain distributions. Distributions of interest, dividends, capital gains and other unearned income from a trust are also unearned income to a beneficiary of the trust to the extent they are not considered earned income under paragraph (ii) of this subsection. As used in this paragraph, "capital gains" shall not include any gains generated from the sale of the taxpayer's primary residence.

The tax rate would be zero percent on the first $200,000, and four percent on unearned income over $200,000.  The bill does not create any exemptions from paying the tax. Taxpayers would be required to report their unearned income to the Department of Revenue within 30 days of filing their federal income tax return. The bill would also allow for the auditing of taxpayers, with the audit not to go back farther than three years.

The fiscal note attached to the bill estimates the tax would raise about $58 million annually for the state. The money raised would go to the Wyoming School Foundation Program.

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