Side-by-side analysis of the House and Senate
As the debate got underway in earnest at the start of the 2022 session, Mississippi House and Senate leaders raced to win the data point war over their proposed tax cuts.
Mississippi, with more than $1 billion in recurring revenue exceeding expected revenue, has what many lawmakers have called a “once in a lifetime” opportunity to “do something big” on tax reform.
Senate and House leaders turned to state economist Corey Miller for their proposals to be noted. Miller and his team use a relatively basic tool from Regional Economic Models, Inc. (REMI) called Tax-Pi that models the fiscal impact of potential policy changes.
The Senate plan calls for:
• Eliminate the 4% personal income tax bracket (taxable income of $5,001 to $10,000) by lowering the rate by 1.0 percentage points for each of the 2022, 2023, 2024 tax years and 2025
• Reduce the sales tax rate on groceries (unprepared foods) from 7% to 5% effective July 1, 2022
• Reduce total revenue collected by the state through motor vehicle taxes and/or fees by $13,300,000 per fiscal year beginning July 1, 2022
• Provide rebates to individual taxpayers totaling $131,000,000 by the end of fiscal year 2022
For the relief component of income tax alone, the elimination of the 4% bracket from $5 to $10,000 would represent an annual saving of $200 per taxpayer.
The three-page analysis provided by the University Research Center uses the Department of Revenue’s FY22 estimates as a benchmark.
URC Analysis of Senate Tax 3.11.22 by yallpolitics on Scribd
The house plan calls for:
• Increase personal income tax exemptions in the 2023 tax year to $37,700 for individuals, $75,400 for married couples and $36,600 for heads of families. The bill will increase these exemptions in subsequent taxation years when general fund revenue exceeds the product of an inflation factor and $6,175,000,000, less the decrease in revenue from tax reductions. sale on groceries. Exemptions will increase by these amounts as they occur until personal income tax is effectively repealed.
• Increase general sales and use tax rates from 7.0% to 8.5% effective July 1, 2022.
• Reduce the sales tax rate on groceries (unprepared foods) from 7.0% to 5.5% effective July 1, 2022; then reduce by 0.25 percentage points each July 1 thereafter until fiscal year 2028, when the rate will equal 4.0%.
• Create an ad valorem motor vehicle tax credit refund fund to reduce the ad valorem portion of motor vehicle taxes by 50%.
As for the income tax relief element alone, the income tax would eventually disappear, so it is difficult to say on average what the specific dollar savings would be from the elimination of income tax. However, the exemptions would be increased.
The seven-page analysis on the House side is much more in-depth in terms of analysis and the URC essentially provides data on two different scenarios – one based on the base DOR revenues collected during the first half of the fiscal year (approximately $545 million projected) and revenue should now be collected for FY22 ($1.143 billion) which we remain on track to collect.
URC Analysis of HB 531 Final by yallpolitics
This analysis is ‘in the weeds’, but it is essential that decision makers arrive at an agreed baseline to accurately project the impact of these proposals. This has been difficult for policymakers in recent years, as actual revenues have exceeded projected revenues by about $600 million on average over three years. But the numbers provided seem to indicate that Mississippi has room on its fiscal horizon for meaningful tax reform.