House Speaker Philip Gunn believes phasing out state income tax over time and raising the sales tax will give Mississippians more money in their pockets and still provide enough revenue for the state to function properly.
Opponents say eliminating a third of the state’s revenue will only have an adverse effect in the long run.
Lawmakers convened last Wednesday for two hearings to examine the state’s tax structure and decide if the state can cut its income tax. Gunn wants to gradually eliminate the state’s individual income tax and replace the revenue with a 2.5% increase in the state’s current 7% sales tax. It’s a move that Governor Tate Reeves says won’t work, calling Gunn’s proposal a “tax swap”.
“I’ve said it before and I’ll say it again,” Reeves wrote. “I am absolutely opposed to taking less from here and taking more from you there. I’m opposed to robbing Peter to pay Paul. In fact, I want Peter AND Paul to have more money in their pocket.”
Reeves said his hope is that income tax can be phased out without increasing another form of taxation.
Another critic of the proposal, Sen. Hob Bryan (D-Amory), thinks the state is better served by repairing crumbling infrastructures and funding public education, moves he says would attract more people to the state than not having an income tax.
“How much of an impact do you think it has on people moving to the state of Mississippi when every newspaper in the United States of America is talking about the capital city of Jackson not having any water?” he added.
Currently, nine states don’t charge income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.
Individual income taxes made up 34% of Mississippi’s state tax revenue during the state budget year that ended June 30, according to the state Department of Revenue. That was about $2.2 billion from individual income taxes in the nearly $6.6 billion the state collected for its general fund.
Nsombi Lambright, Executive Director of One Voice, says the proposal would provide much more support to the state’s wealthiest, primarily white taxpayers. She says it will only further widen the already existing inequities.
“A disproportionate share of Mississippi’s taxpayers in lower income brackets are Black and Brown. Eliminating the income tax and raising the sales tax would place the burden of raising revenue on them,” she said. “The income tax currently generates nearly $1.9 billion in revenue in a year. This proposal is likely to cost the state more, which would lead to cuts in public services that Mississippi’s working families need.”
Mississippi is months away from making a decision. The next scheduled session doesn’t begin until January 2022. Gunn says he is open to making changes to the bill.
“I think the House plan is the only one on the table,” he said. “We’re willing to work from that and look at another option or plan.”