Mississippi Personal Income Tax Elimination | Mississippi Politics and News
Submitted by Bigger Pie Forum
The Mississippi legislature is considering eliminating the state’s personal income tax to help boost the Mississippi economy. The theory is that such a move would cause companies to move to Mississippi or stay here.
Some Mississippi policymakers believe that if Mississippi is to enjoy population growth (a good indicator of a healthy economy since residents tend to vote with their feet for better jobs and living conditions), changes need to be made. to the state tax code.
In the last U.S. census, the state lost more than 6,000 residents, the state’s first population loss after 60 years of largely stagnant growth relative to neighboring states.
Of the states that Mississippi competes with, Florida, Tennessee, and Texas have all experienced large-scale population growth over the past decade. One thing the trio share in addition to dynamic, high-growth economies is the lack of personal income tax.
The legislature’s Joint Tax Study Committee concluded two days of hearings on August 26, as national and national experts testified about the benefits and possible challenges of removing income tax.
While most of these experts agreed that there are benefits to eliminating income tax, most of the conversation has centered on how to replace that income in order to fund the government of the State.
Personal income tax revenue was $ 1.9 billion in fiscal 2019, the last “normal” year before the influx of “stimuli” and other COVID funds. This $ 1.9 billion represented nearly a third (32%) of the $ 5.6 billion budget of the General State Fund. Corporate income taxes and franchise taxes added 8.5 percent ($ 488 million), but the elimination of these taxes is not being considered so far. Sales tax (and the related “use tax”) accounted for 44% ($ 2.5 billion) of the General Fund budget.
The initial tax reform proposal drafted by House Speaker Philip Gunn, which was passed by the House earlier this year but died in the Senate, would have phased out state income tax and l ‘would have paid by increasing the sales tax on most items from 7 to 9.5. percent. However, the sales tax on grocery products would be cut in half, from 7% to 3.5%.
Several trade associations have spoken out against the part of the president’s proposal that would have increased the sales tax by 2.5 percentage points (the same increase as the proposed increase in the general sales tax) on several types of inputs. commercial, such as manufacturing machinery and agricultural tools, among others. This would place the companies concerned at a competitive disadvantage compared to similar companies in other states.
These items already have a sales tax rate lower than the retail sales rate of 7 percent, but many economists believe that business inputs should not be taxed at all because this tax is simply added to the price of the goods, without the consumer realizing the real amount of the tax. they pay on a product. It is better to place sales tax on final purchases.
Many retirees complained that the President’s plan would increase their taxes, since they already pay no tax on their retirement income and that the sales tax increase would hit them hard. The president argues that the reduction in taxes on grocery stores will offset a large chunk of other sales tax increases for them, since, he says, retirees spend a higher percentage of their income on food. One person who testified at the hearing, using analysis from a liberal Washington think tank, said income taxes should be increased to pay for the services the poor need, and that raising the sales tax would hurt the poor more than anyone else.
While Gov. Tate Reeves, President Gunn and Lt. Gov. Delbert Hosemann seem to agree on the principle that income tax should be phased out, details will be critical. The governor expressed the wish to phase it out without increasing other taxes. This would be accomplished by lowering the rate each year based on the income growth of the previous year, which will take between 18 and 40 years, depending on the patterns of economic growth. It goes against the President’s plan. Hosemann was not specific about his ideas.
All of this sets up an interesting political battle in the months to come if leaders fail to reach a deal before the 2022 legislative session.
Submitted by Bigger Pie Forum – Promoting Market-Driven Economic Growth for a Bigger, Brighter Mississippi. Learn more about BPF here.