Mississippi leaders eye additional tax cuts after 2022’s historic tax cut package enacted

• Columnist Sid Salter writes that tax policy changes have been on the front burner in no less than 14 other states in the last two years.

In 2022, Gov. Tate Reeves signed the largest tax cut in Mississippi history – the Mississippi Tax Freedom Act. The tax cut plan promised to eliminate $525 million in Income tax relief by 2026.

That tax cut did not fully eliminate the state’s income tax, but Reeves and a number of Republican legislators established a plan to reach that goal.

In the wake of that, two legislative panels are already studying the state’s tax structure with an eye to additional tax cuts. Republican State Reps. Trey Lamar and Scott Bounds are leading a House Select Committee on Tax Reform appointed by House Speaker Jason White. Lt. Gov. Delbert Hosemann has also appointed a bipartisan committee to look at state taxes and other fiscal concerns.

During his Neshoba County Fair speech last month, White said he hopes to work to at least cut the grocery sales tax by half, cutting it from the present 7 percent to 3.5 percent. White acknowledged it would be a hard legislative sell since municipalities received 18.5 percent of the current 7 percent tax to fund local government operations.

But during a period of high inflation and soaring grocery prices, even Republican state lawmakers across the country are looking at ways to help families keep more of their money in their pockets to buy food.

So why is the state’s Republican leadership so focused on cutting taxes, particularly income taxes? Certainly, conservative fiscal policies are part of the reason. But there is also a retail political concern for GOP lawmakers. Philosophically, income taxes are seen by the GOP as impediments to investment and job creation.

Three dollars of every $5 collected in income taxes in Mississippi comes from counties where Republican legislative candidates are strong. So, the tax issue is as much a GOP primary issue as it is a general election issue.

In the state’s 82 counties, 15 counties pay the majority of individual income taxes. Based on FY 2021 numbers in the Mississippi Department of Revenue 2023 Annual Report, taxpayers in those 15 counties paid $1.282 billion or 59 % of the total $2.157 billion collected statewide:

Madison ($174.4 million), DeSoto ($161.5 million), Hinds ($137.1 million. Rankin ($136.6. million), Harrison ($134.6 million), Jackson ($95.9 million), Lee ($76.8 million), Forrest ($70.1 million), Lamar ($59 million), Lafayette ($57.6 million), Lauderdale ($49.4 million), Jones ($36.9 million), Lowndes ($34.3 million), Pearl River ($29.3 million) and Oktibbeha (28.9 million).

Expect major pushback on sales tax cuts from cities and counties. The sales tax diversions make such cuts a difficult decision without some mechanism to make local governments whole.

But tax policy changes have been on the front burner in no less than 14 other states in the last two years. States primarily focused on income tax, sales tax, or property tax relief proposals: Arkansas (income), Colorado (property), Connecticut (income), Georgia (inflation relief payments, property), Idaho (property), Indiana (income and property), Iowa (income and property), Kansas (income), Kentucky (income), Louisiana, (property, sales, income) Michigan (rebate and income), Minnesota, Missouri, Montana, Nebraska, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, South Carolina, Utah, Vermont, Virginia, West Virginia and Utah.

What those national state government tax policy trends suggest is that Republican taxpayers in the more affluent counties who are already paying the lion’s share of income, sales, and property taxes in their counties are asking their legislators for some relief.

Historically, Congress pushed certain tax burdens from the federal government to the states. Now, state legislatures across the country are beginning to at least consider following suit and pushing some tax burdens down to local governments. Mississippi leaders have pushed back against that notion.

Tax reform is always tricky depending on who pays and who collects.