SIMMONS: What Mississippi’s Tax Cut Really Does

Submitted by State Senator Derrick Simmons, Senate Democrat Minority Leader

“The permanent impact of the newest tax cut will strip away over $500 million for public programs and services,” the Senate Democrat Leader writes.

As Mississippi’s largest-ever tax cut for the wealthy goes into effect, community needs go unmet, July 1^st marks the beginning of Mississippi’s largest-ever tax cut for the wealthy. Despite the over 50 tax cuts given to the state’s wealthiest and to corporations over the past 10 years, many communities, particularly those in the Mississippi Delta, continue to be underserved and underfunded. As plans for additional tax cuts continue, the impact of a system that worsens inequity and can’t sustain current needs is already evident.

Under Mississippi’s newest tax cut plan, the state’s lowest-income tax bracket will be eliminated and the top income bracket will be gradually reduced over the next four years. By 2026, Mississippi will have adopted a 4% “flat tax” on incomes over $10,000. Flat taxes may seem fair on the surface, but income taxes do not exist in isolation; Mississippi relies heavily on regressive sales and excise taxes that are unfairly imposed more strongly on lower-income families. Most tax breaks also disproportionately benefit the wealthy so graduated income taxes are necessary to balance the rest of this unfair tax structure. As a result of the change in the state’s tax structure, wealthier income earners―a group that already pays a smaller percentage of their income in taxes than the state’s lower-and-middle income earners―will see the largest cut in the amount of taxes paid to the state in Mississippi’s history.

According to data from the Institute on Taxation and Economic Policy, once fully implemented, only 37% of the tax cut will go to Mississippians earning, on average, $90,000 and less. In other words, nearly two-thirds of the savings from the tax cut will go to the wealthiest 20% of earners. The tax burden for the state’s highest income earners will be reduced by an average of $6,700. Meanwhile, the state’s lowest-income earners will pay only $14 less, on average, in taxes to the state―the cost of one large pizza. Even more, in years two through four of the tax cut, Mississippi’s lowest income earners―a group that pays a greater share of their income in taxes than the state’s highest income earners―will not see any additional savings from the tax cut while the state’s highest earners will continue to benefit.

The truth is that there are simply two ways to pay for this move to a flat income tax structure: by lowering tax rates for the wealthy and by cutting back on public investments. Neither makes sense at a time when the state needs higher revenue to help pay for the programs and services that we all need and use. The permanent impact of the newest tax cut will strip away over $500 million for public programs and services like healthcare, education, infrastructure, and workforce development. Just last week, news reports announced the firing of two surgeons at the Greenwood Leflore Hospital. This comes a few months after earlier reports of the hospital laying off 30 employees and facing serious financial hardship. Current state revenue levels are already not enough to help sustain this and other vital public services, particularly in lower-income communities even as these communities shoulder a greater tax burden than their wealthier neighbors.

Even worse is that these disparities are likely to deepen. The newest tax cut plan calls for the state to once again consider fully eliminating the state individual income tax as early as 2026. This means that income disparities in the state would increase, much-needed investments in local communities could not be realized, and more state revenue would be eliminated.

Yes, federal funding from the CARES Act and American Rescue Plan Act have helped the state get ahead during the health and economic hardship caused by the pandemic. But the current surplus is temporary while the tax cuts are permanent. Without more equitable, progressive tax policies that lead to higher state revenue and without forward-thinking investments, many communities across the state will suffer similarly to the situation of the Greenwood Leflore Hospital, which has provided necessary medical care to local communities over the years.

The future Mississippi we envision is dependent upon the decisions we make today. We must prioritize community above policies that benefit the few and strip valuable resources from our communities and our people.

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Submitted by State Senator Derrick Simmons. He is the Senate Democrat Minority Leader in the Mississippi Senate.