- Without question, it is the most significant tax reform legislation in state history. Given the way in which it was passed, it will likely also become the most studied.
A voice vote in favor of tabling the motion to reconsider on HB 1, the tax reform package, taken Friday morning sent the measure onward to Governor Tate Reeves (R) for his signature.
Without question, it is the most significant tax reform legislation in state history as Mississippi will become the first state to ever eliminate an existing income tax.
Given the way in which it was passed, it will likely also become the most studied tax reform legislation in state history.
Democrats in the chamber wanted the bill to go to conference after an error was discovered in the trigger language related to how fast the state will move toward the full elimination of the income tax. That error was noted after the bill passed both chambers.
On Thursday, the House overwhelmingly voted to concur with the Senate’s changes to the legislation that phases out the state income tax while also cutting the sales tax on groceries to five percent, adding nine cents to the gas tax over three years, and establishing a Tier 5 in the state employees retirement system for new hires.
House Democrat leader State Rep. Robert Johnson asked that the bill be reconsidered on Friday, allowing lawmakers to correct the trigger language, calling the bill “dangerous.”
“There was a trigger in the bill, which we asked about a number of times yesterday, what the trigger would be. It was supposed to be 85 percent of $400 million of the revenue when the income tax would kick in. But it actually says 85 hundreds of a percent, which is actually less than one percent,” Johnson said.
As previously reported, Senator Josh Harkins (R), Chair of the Senate Finance Committee, told his chamber prior to the bill’s passage that a one percent cut to the income tax equates to $400 million. If the economy can produce 85 percent of that $400 million in surplus tax collections, the intention was to then enact a 20-basis point cut to the income tax rate. If the surplus is 100 percent of the $400 million, then a 25-basis point cut would occur, and if the surplus is 115 percent, then a 30-basis point cut would be enacted.
However, as written and approved by both chambers, new tax cuts would be triggered starting when the state has surplus revenue that exceeds 0.85 percent of 1 percentage point of income tax revenue. In effect, this means new cuts would take effect with as little as a few million in surplus.
Governor Reeves, an unrelenting advocate for the full elimination of the income tax, acknowledged the possibility of “tweaks” to the measure but said Thursday “those can certainly be considered in future legislation.”
On Friday, the Governor celebrated the historic legislative victory, announcing that the House had tabled the motion to reconsider HB 1, saying on social media, “What does this mean? The bill is headed to my desk. NOW I have 2 options: Option 1: Sign HB1 and end the tax on work! Option 2: Veto the bill! (HINT: Option 2 AIN’T happening!!) It’s a great day for Mississippi!”
Daniel Tyson
Frank Corder
