Wednesday, April 21, 2021

Bill Eliminating Mississippi’s Income Tax Passes House, Governor Reacts

Bobby Harrison and Geoff Pender/Mississippi Today

A sweeping bill that would eliminate Mississippi’s personal income tax and cut the sales tax on groceries in half while increasing the sales tax on other items by 2.5 cents passed the House on Tuesday.

As the bill was being passed, Gov. Tate Reeves praised House GOP leaders for their proposal to phase out the personal income tax, but threw cold water on their plan for commensurate increases in sales and other taxes to balance the books.

“I wouldn’t want to be a Republican that votes to increase taxes substantially for certain segments of the public,” Republican Reeves said during a news conference. “… I personally support tax cuts, not tax swaps or tax transfers or tax increases … I don’t think we ought to sit here and pick and choose who to take money from. I think we ought to take less from everybody.”

As Reeves was speaking, the proposal passed the House by an 85-34 vote (needing 72 to pass) after Ways and Means Chair Trey Lamar, R-Senatobia, took about 30 minutes of questions on the bill called the Mississippi Tax Freedom Act. While most of the questions were by those opposed to the measure, no one rose to speak against the bill. Most of those voting no were Democrats, though some in the minority, including House Democratic leader Robert Johnson of Natchez, voted for the proposal.

“All Mississippians can look to this as a red-letter day,” said House Speaker Philip Gunn, who authored the bill along with Pro Tem Jason White and Lamar. “… For every Mississippian who pays an income tax, today is the day we started down the road to eliminating that burden. There will be an immediate benefit to the citizens of the state with the passage of this plan … There is coming a day when the entire income tax is eliminated.”

The bill would exempt the tax on the first $50,000 in income for an individual and first $100,000 for married couple starting with the 2022 tax year. And then over a 10-year period the personal income tax would be completely phased out, though the yearly reduction would be postponed in any year where revenue does not grow by 2.5%.

In addition, the 7% tax on groceries would be cut to 4.5% on July 1 and within five years reduced to 3.5%. Also on July 1, the sales tax on most retail items would be raised from 7% to 9.5% and the sales tax on other items which is currently 5% or less, such as manufacturing equipment, vehicles and airplanes, would be increased by 2.5% in an attempt to make the proposal revenue neutral.

The tax on cigarettes would be increased by 50 cents a pack, and taxes on vaping devices, alcohol and other items would also increase.

Lamar said a person making $50,000 a year would see a decrease in taxes of $2,035 and would need to spend about $82,000 to pay as much in sales taxes as the savings in income taxes. A married couple earning $100,000 would save $4,535 and would have to spend $181,400 to pay as much in sales tax as in income tax savings.

Lamar said the bill “broadened the tax base” by charging more sales tax for those who might not be paying income taxes because they were visiting the state or were cheating the state by not paying the income taxes they owed. By the same token, he said, all working people would receive a tax break.

But Rep. Bo Brown, D-Jackson, said the increase in the sales tax would hurt poor people who might not pay income taxes because of their low income.

Rep. Tommy Reynolds, D-Charleston, praised the effort to cut the grocery tax that would be an aid to poor people, but still voted against the proposal because the bill also would provide income tax cuts for the wealthy.

“Instead of giving people earning more than $100,000 a tax break, I would rather eliminate the grocery tax and help more people,” Reynolds said.

But Johnson, the Democratic leader in the House, said overall he supported the bill and expressed hope that before the proposal makes its way through the legislative process more might be done to help low-income earners.

“I keep looking for the Trojan horse, the trick in this, but it seems like something I would write,” Johnson said. “It’s a bill for the working people of Mississippi, and right now it looks like the budget concerns we had have been addressed.”

But The Parents Campaign, an education advocacy group, questioned whether the proposal would be revenue neutral and, if not, could negatively impact needed education funding. In addition, the group said the proposal could be devasting for the state’s pre-kindergarten program.

“Mississippi Early Learning Collaboratives got more than $5.5 million in donations via income tax credit incentives in 2020 – almost half of all collaborative funding,” the Parent’s Campaign said Tuesday in social media posts urging its members and lawmakers to oppose the bill.

The plan includes the House’s $1,000 a year teacher pay raise, and that coupled with tax cuts, teachers making $50,000 a year would “immediately” benefit by $3,000 a year total, and those making $40,000 by $2,500.

Gunn said 57% of Mississippians fall into the $50,000 or under group.

Reeves said the phased elimination of the lowest bracket of income tax — passed when he was lieutenant governor in 2016 — shows that all personal income taxes could be phased out over time without a corresponding increase in other taxes. He did not mention that more than 50 tax cuts enacted during his term as lieutenant governor, most for corporations, coincided with several years of drastic state agency budget cuts, deficit spending and raiding of state “rainy day funds.”

“The state collected $400 million more through the first seven months of this fiscal year than was budgeted,” Reeves said Tuesday. “What if we let Mississippians keep that money rather than spend it somewhere else?”

While there might be attempts to force a reconsideration of the vote on the bill, it most likely will advance to the Senate in the coming days.

Asked whether he and other House leaders had communicated with the governor in drafting the measure, Gunn replied with a curt, “No.” As for communications with the Senate and-or lieutenant governor, Gunn said, “We have talked in general terms that eliminating the income tax is important for us,” but indicated Senate leaders had not been involved in drafting the measure.

Lt. Gov. Delbert Hosemann, through a spokeswoman, had no comment on the proposal on Tuesday. Some Senate leaders said the House unveiling of the bill caught them by surprise, although they were vaguely aware the House was discussing an income tax cut.

BOBBY HARRISON

Bobby Harrison, Mississippi Today’s senior capitol reporter, covers politics, government and the Mississippi State Legislature. He also writes a weekly news analysis which is co-published in newspapers statewide. A native of Laurel, Bobby joined our team June 2018 after working for the North Mississippi Daily Journal in Tupelo since 1984. He is president of the Mississippi Capitol Press Corps Association and works with the Mississippi State University Stennis Institute to organize press luncheons. Bobby has a bachelor’s in American Studies from the University of Southern Mississippi and has received multiple awards from the Mississippi Press Association, including the Bill Minor Best Investigative/In-depth Reporting and Best Commentary Column.

GEOFF PENDER

Geoff Pender serves as senior political reporter, working closely with Mississippi Today leadership on editorial strategy and investigations. Pender brings 30 years of political and government reporting experience to Mississippi Today. He was political and investigative editor at the Clarion Ledger, where he also penned a popular political column. He previously served as an investigative reporter and political editor at the Sun Herald, where he was a member of the Pulitzer Prize-winning team for Hurricane Katrina coverage. Originally from Florence, Mississippi, Pender is a journalism graduate of the University of Southern Mississippi and has received numerous awards throughout his career for reporting, columns and freedom of information efforts.

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