Will state legislative leaders join growing national trend toward property tax limits?

• Columnist Sid Salter writes that property taxes have historically remained low due to low property valuations in Mississippi. Yet, that status is evolving as it has in other parts of the country.

As Mississippi legislative leaders contemplate additional tax reforms in the coming 2025 regular session of the Mississippi Legislature, the spotlight has been on additional state income tax cuts and yet another examination of reducing the state’s highest-in-the-nation 7% grocery tax.

Mississippi House Speaker Jason White has already talked of focusing his efforts on additional reductions in the state’s income tax and cutting the state’s grocery tax. In recent years, lawmakers have enacted a $525 million income tax cut – the largest in state history – set to be fully implemented over two years. 

Generally absent from tax cut debates in Mississippi is the topic of property taxes. Why? It’s the fact that property taxes in Mississippi are primarily the province of county and municipal governments, so legislative debate on property tax issues is neither frequent nor particularly enthusiastic unless fueled by local government advocates.  

Based on national 50-state comparisons, Mississippi property taxes are considered in the lower third of the states and as a business climate indicator is ranked 37th by the Tax Foundation. One of the reasons that property taxes are low here is that state leaders determined that one way of holding property taxes low for property owners was to shift to a first-in-the-nation retail sales tax in 1934. 

Mississippi’s property tax policy – including homestead exemption, economic development exemptions, industrial exemptions and other rules – creates an environment in which property tax rates remain low. The bottom line is that property taxes have historically remained low due to low property valuations in Mississippi. 

That status is evolving in Mississippi as it has in other parts of the country. Property values are increasing here and in some venues across the state, those increases are dramatic. Inflationary influences are also at play. 

In Mississippi, as in most states, increased home values will result in higher property taxes even if no increase in the property tax rate is levied. Higher home values equal higher taxes. Again, local governments take the lead in property taxes and are dependent on the revenue.  

How dependent? The Lincoln Land Institute, a non-profit foundation, sums up the relationship as follows: “The ad valorem tax, or property tax, comprises the primary source of revenue for each of the 82 counties within the state of Mississippi. Municipal governments and public schools (K-12) also rely on property tax collections, with schools using property taxes to fund approximately a third of their budgets. The state relies heavily on the sales tax, and municipalities receive a portion of the sales taxes generated within their city limits. Mississippi taxes personal property as well as real property. In 2021, personal property taxes accounted for 29.4 percent of its tax base, a higher share than any other state classifying personal property.”

So, when state government leaders talk about cutting the grocery tax or other sales and use taxes, local governments fight those efforts by saying that if the cuts are implemented, local governments will be forced to raise property taxes.

The historic success of the Mississippi sales tax in broadening the state’s tax base during the Depression gave it life well after the nation’s economy recovered and the state’s property taxes were the beneficiary. The shift of the tax burden from primarily property owners to all citizens was intentional.  

Stateline.org reports that there are currently ballot initiatives in at least eight states (Arizona, Colorado, Florida, Georgia, New Mexico, North Dakota, Virginia and Wyoming) seeking to implement property tax reforms. In addition, legislators in other states have put forth property tax rebate legislation while some have introduced bills to adjust property assessments.

Jared Walczak, vice president of state projects at the pro-business Tax Foundation, told Stateline he expects many other states to follow suit. 

The same observation made in January still holds: Given Mississippi’s status as having Republican super majorities in both houses of the Legislature and GOP strength in many of the state’s counties with the highest property values, can a showdown on property tax relief be too far in our future? And how long can lawmakers avoid a fix of the state’s flawed ballot initiative process?