As the current legislative session heads into its final weeks, lawmakers remain in disagreement on a long-debated tax reform bill. Neighboring states have already enacted income tax cuts, incentivizing legislators to take action that keeps Mississippi competitive.
In the face of rising inflation and gas prices, many are left wondering how such significant cuts to the state’s general fund would affect public services, such as the already strained school system.
“It simply is not possible to eliminate such a huge chunk of our state revenue without a devastating impact on state budgets – including public schools,” the Mississippi Parents’ Campaign said on their website.
District 54 Rep. Kevin Ford (R) says that the House has built-in protections to ensure that schools and other public programs are not affected by tax reform.
“State revenues have come in over $1 billion higher than we ever expected for the past two years,” Ford said. “If we are taking in more money than we need, it just makes sense to put it back in the pockets of taxpayers. That is where it will do the most good.”
Revenues over $1 billion above estimates 2 years in a row. Now is the time:
MS Legislature should Eliminate the Income tax. (2/2)
— Tate Reeves (@tatereeves) February 16, 2022
The latest House plan would exempt $25,000 in income for individuals and $50,000 for married couples from the start. The rest of the income tax would be phased out over 12 to 15 years using a “growth trigger” of 1.6% a year. So every year any revenues taken in over 1.6% growth would be used to buy down the tax, up to $150 million. Any amount over $150 million would stay in the state budget, ensuring that the tax cuts are phased out slowly and sustainably.
The House plan also includes a $600 million reserve fund in the event that proposed tax cuts create budget shortfalls.
“People tend to forget that we’re seeing about $80 million from the lottery as well,” Ford added.
Senate leaders are more cautious in their approach to tax cuts, citing economic insecurities stemming from conflict in Ukraine and inflation. In their most recent plan, Senators outline an 8-year plan that would cost about $439 million annually when fully implemented. By contrast, the House plan would come in around $1.8 billion when fully realized.
“We need both meaningful and sustainable tax reform,” Lt. Gov. Delbert Hosemann said in a press conference on Monday.
For more on this, check out Geoff Pender’s 5 things to know about the Great Mississippi Tax Cut Battle of 2022 in Mississippi Today.See a typo? Report it here.