The key will be more unity of purpose within the Republican ranks and less fighting of insignificant turf wars that only results in harmful friendly fire.
The one policy action the Mississippi Legislature could take in the 2022 session that would positively impact the pocketbooks of all taxpayers in the Magnolia State is the elimination of the state income tax. The question is: Can Mississippi Republicans finally deliver it?
Make no mistake – The issue sits squarely on Republican shoulders as both chambers in the legislature are controlled with a GOP supermajority and a Republican holds the Governor’s seat. Democrats are, for the most part, sidelined on this issue, that is unless Republicans cannot unify. Then, factions will need to appeal to minority party members to achieve a positive vote on their plans.
Governor Tate Reeves, a Republican, has made it one of his top priorities since taking office last year, yet lawmakers have not been able come to an agreement on how to get there.
Reeves is adamantly opposed to tax swaps that would phase out the income tax while raising taxes in other areas to essentially make the impact on the state budget a wash. He reiterated his position this week with the release of his office’s FY 2023 Executive Budget Recommendations. Included in that EBR were agency cuts and a plan to eliminate the income tax.
“One of my top priorities for the coming year is eliminating Mississippi’s individual income tax. Let me be clear, I am proposing eliminating the state income tax, not a tax swap,” Governor Reeves shared on Facebook following his EBR release. “Despite a global pandemic and recession, Mississippi’s economy is booming. While Democrat-led states shutdown and locked down, Mississippi opened up.”
Reeves says that thanks to the commitment to free enterprise, Mississippi saw state revenues and new capital investment soar.
“Mississippi is in the best fiscal and financial shape in the state’s history, and the individuals who are responsible for these tremendous economic accomplishments deserve to reap the rewards of our success. Those individuals are our job-makers and workforce,” the Governor states.
Governor Reeves has proposed allocating $1 billion of excess revenue towards eliminating the state individual income tax. He says this will completely eliminate the 4% bracket in Fiscal Year 2023 and will also eliminate a significant portion of the 5% bracket starting in Calendar Year 2023. To effectively eliminate the individual income tax in a way that protects the state’s fiscal and financial health, Reeves proposes implementing budget caps and only increasing the state’s general fund budget by no more than 1.5% each fiscal year. Additionally, he says 50% of the excess revenue should go towards the elimination of Mississippi’s individual income tax, with the goal of eliminating it completely in 5 years.
State Senator David Blount, a lead Democrat in the upper chamber, offered a warning to his colleagues and to local officials planning to pursue the income tax elimination. He called the plan “irresponsible” when asked for his thoughts on Tuesday.
“If Republicans propose eliminating $2 billion from the state budget they should identify the $2 billion in cuts they will make to balance the budget,” Sen. Blount told Y’all Politics. “Local government in particular need to watch out. It is irresponsible to eliminate long term annual revenue based on a short term federal windfall in revenue.”
Governor Reeves contends that not only will his plan to eliminate the income tax increase take-home pay for hard-working Mississippians, it will also allow Mississippi to remain competitive against states like Texas, Florida, and Tennessee that do not have such a tax. Governor Reeves says eliminating the individual income tax will further help fuel Mississippi’s economic engine for the next 100 years.
In the 2021 legislative session, Speaker of the House Philip Gunn offered his own plan to eliminate the state income tax. That bill included a 10-year phase out of the individual income tax coupled with a cut to the grocery tax from 7% to 4% and a 2.5% increase on the state’s sales tax, among other provisions. Gunn proposed the plan late in the 2021 session.
Some lawmakers felt it was dumped on them with little notice, especially those in the state Senate. A similar concern was raised by the business community who expressed the need for more thorough consideration. While the House passed the bill on a vote of 85-34, Gunn was unable to overcome those objections in the Senate. The Senate allowed the bill to die in favor of having a Study Committee consider the prospects of eliminating the income tax during the off season.
Since then, Gunn has traveled the state promoting his plan to civic groups and Republican clubs, trying to rally support. In September, members of the House and Senate met for two days of hearings on the topic with no resolution when they adjourned, leaving members with more questions than were answered.
Ahead of those tax reform hearings, The Parents Campaign, a left-leaning public education lobbying group, came out against the elimination of the state income tax, saying it threatens teacher pay and school funding, directly taking aim at Gunn’s proposal. Nancy Loome, Executive Director for The Parents Campaign, called the Speaker’s plan a convoluted proposal to eliminate the income tax while raising other taxes to make up the difference.
“Except that it doesn’t really make up the difference.” Loome opined. “Gunn’s plan will leave public schools, teachers, and other important service providers with less funding than they would have without the tax swap.”
Now, with the 2022 legislative session just weeks away, the question remains whether Republicans can coalesce around a plan that will benefit all of Mississippi’s taxpayers while ensuring the state budget remains in the best fiscal condition in state history and meeting the expectations of lawmakers and Governor Reeves alike. That is no easy task, but given the unified government it should be achievable.
Speaker Gunn’s plan, while a starting point, does not appear to be the roadmap forward, at least for Governor Reeves, based on his repeated refrain, and even now for some in the House.
State Rep. Steve Hopkins, a leader in the House Freedom Caucus, told Y’all Politics on Tuesday that he has come to believe that the Speaker’s proposal is smoke and mirrors.
“The proposed income tax elimination bill is anything but. This bill is an immediate increase in taxes and only becomes a tax swap after 12 years. The bill also contains economic benchmarks that if not met could extend the elimination indefinitely,” Rep. Hopkins said. “This bill is nothing more than a smoke and mirrors way of dramatically increasing the tax burden on Mississippians. Who knew the Speaker of the House was actually David Blaine?”
Hopkins voted for Gunn’s House bill initially, “blind to the fine print and what it actually did.” He, along with other members it appears, is now more apt to support Governor Reeves’ plan to eliminate the income tax.
Therein lies the rub. The devil is in the details. Governor Reeves is known for his willingness to get into the fine print more than any other elected leader in state government. Republican lawmakers are seemingly waking to that necessity as well, at least in terms of the income tax elimination.
Mississippi Center for Public Policy CEO Douglas Carswell believes there is common ground in those details that could lead to action this session, at least that is his hope.
“Success is going to come down to the extent to which different advocates for income tax elimination are prepared to find common ground and unite behind a plan. Having discussed the details with those involved, I think there is a lot of common ground that will allow us to get this thing through,” Carswell told Y’all Politics. “The danger is that unless Mississippi Republicans get their act together on this, critics might start to suggest that the only thing they’ll have managed to change is the flag.”
Carswell says there is a real chance that Mississippi’s Republicans can achieve this as the Governor, the Speaker and much of the state leadership favors income tax elimination now.
Empower Mississippi President Russ Latino agrees. He, too, says he remains confident common ground will be found.
“We appreciate Gov. Reeves’ ongoing commitment to the elimination of the income tax. While much work remains to be done to ensure that any policy signed into law generates real tax relief in a swift, certain, and sustainable way, we remain confident that common ground can be found between state leaders,” Latino said. “Mississippi has an opportunity to put its working families first and gain a leg up in attracting new people, capital, and business.”
Whether you talk to conservative think tanks or Republican voters who support the income tax elimination, they agree that the key will be more unity of purpose within the Republican ranks and less fighting of insignificant turf wars that only results in harmful friendly fire.
Forrest Thigpen, Interim State Director for Americans for Prosperity, told Y’all Politics laying out that unified message now would be a good starting point heading into the 2022 session.
“What they should do right now is schedule an end-of-session news conference where they will thank each other for the roles they played in getting this done. Then they must actively pursue that goal, which means intently working together, setting aside personal political agendas. That’s what people want to see,” Thigpen said. “No one who supports eliminating the income tax will want to hear them blaming each other if it doesn’t pass. It’s in their best interest as well as the taxpayers’ for them to be seen working together for the long-term good of the state.”
One of Speaker Philip Gunn’s chief lieutenants in the House is State Rep. Trey Lamar. The Chairman of the House Ways and Means Committee told Y’all Politics that Governor Reeves’ latest comments were a good sign, especially in the recognition of the need for a budget cap. He said nothing stands in the way from Republicans reaching this “milestone accomplishment.”
“With Governor Reeves now fully on board with complete elimination of the income tax within a reasonable timeframe there should be nothing that stands in the way of our Republican leadership reaching this milestone accomplishment during the 2022 legislative session,” Rep. Lamar said. “Hardworking Mississippians deserve to have their labor rewarded and the financial health of our children’s future depends upon it.“
The disconnect between the two chambers in the Mississippi Legislature and between legislative leaders and the Governor is avoidable. Mississippians elected a unified government to tackle big issues, just like the elimination of the income tax. When Republicans come together and lead, big things can happen in the Magnolia State, as they are the party in sole control at this juncture.
Whether that happens in 2022 is left to be seen.
