Top Mississippi lawmakers reach agreement on income tax cut
Mississippi House and Senate leaders reached an agreement on Saturday to cut state income tax over four years, saying it would be the largest tax cut in the state. state history.
“We are positioning ourselves to be one of the most tax-friendly states in the country,” Republican House Speaker Philip Gunn said.
As of next year, the 4% tax bracket would be eliminated. The following three years, the 5% tranche would be reduced to 4%.
After the first year, the tax-free income levels would be $18,300 for a single person and $36,600 for a married couple, lawmakers said.
Republican Lieutenant Governor Delbert Hosemann said the tax cut plan was responsible.
“Our constituents expect us to fund basic government services in infrastructure, education, health and other areas,” Hosemann said in a statement Saturday. “Our budget experts have assured us that we can continue to do this and significantly reduce the tax burden on hard-working Mississippians.”
Mississippi is one of the poorest states in the country and its income tax generates 34% of state revenue. Poorer residents would see no benefit in eliminating income tax because they are not paying it now.
Mississippi has enjoyed strong tax collections in recent months, in part due to increased federal spending during the COVID-19 pandemic. But the state also faces costly budget items, including a lengthy court case that requires improvements to the mental health system. Legislators have rarely put all the money needed into a school funding formula that has been in effect since the late 1990s.
Senate Finance Committee Chairman Josh Harkins, a Republican from Brandon, said the tax cut would cut state revenue by $185 million in the first year. By the last year, the figure would be $525 million. The part of the budget financed by the State amounts to almost 7 billion dollars.
The tax cut plan will be put to the votes of the full House and Senate in the coming days, and it is expected to pass.
Gunn and Hosemann had been at odds over the tax cut proposals for several weeks.
Gunn and Republican Governor Tate Reeves wanted to phase out Mississippi’s income tax over several years. Hosemann sought a more cautious plan to reduce, but not eliminate, income tax and to reduce the grocery tax and temporarily suspend the state gasoline tax.
Under Saturday’s agreement, the gas tax and grocery tax would not change. The agreement specifies that by 2026, lawmakers should assess whether to phase out the remaining elements of income tax.
“The goal is the elimination of income tax in Mississippi, and we’ve taken an important step toward that goal here today,” House Ways and Means Committee Chairman Trey said. Lamar, a Republican from Senatobia.
Reeves on Saturday called the plan a “good step” but said he still wanted to eliminate income tax.
“It’s a win at the start of this fight. This is not the end,” he wrote on Twitter.
Russ Latino is president of Empower Mississippi, a group that advocates limited government and has lobbied for the elimination of income taxes. He welcomed the deal lawmakers reached on Saturday.
“It’s happening in a fast way that’s going to put money back in workers’ pockets at a time when we have record inflation,” Latino said.
According to the National Conference of State Legislatures, nine states have no income tax and one, New Hampshire, only taxes interest and dividends. Opponents of Mississippi’s income tax repeal point to Republican-led Kansas, which enacted major tax cuts in 2012 and 2013 but repealed many in 2017 after running deficits large and persistent budgets.
Under current laws, a single person with no dependents in Mississippi currently pays no tax on the first $12,300 of income. Due to tax reductions approved years ago, the non-taxable amount will increase to $13,300 after this year. The state has a 4% tax on the next $5,000 of income and a 5% tax on all income above that.
Saturday night was the deadline for lawmakers to table final versions of tax bills and budget bills. They missed the budget deadline and filed placeholder bills. They face a Monday deadline to approve spending plans for the state’s budget year that begins July 1.
Follow Emily Wagster Pettus on Twitter: http://twitter.com/EWagsterPettus.