Household income tax repeal picks up speed, ‘cautious’ Senate plan coming soon


Mississippi House Speaker Philip Gunn’s Tax Freedom Act, a proposal to phase out the state’s personal income tax over the next decade, is one of the first drafts of major bills that Republican Clinton pushed forward in the week following the convening of the new session.

But quick action by the House does not guarantee that the tax reform plan will soon become law. The Senate has its own plan underway — and top leaders have indicated priorities that may differ from those of the architects of the House bill.

In an interview with the Mississippi Free Press, Senate Finance Committee Chairman Josh Harkins, R-Flowood, confirmed that the Senate will release details of its plan to the public soon, likely this week. The future of Mississippi tax reform lies in negotiation between the two chambers.

Unless a consensus emerges comparable to unvetoed support for medical marijuana in the Senate, Governor Tate Reeves’ assent will be just as necessary.

“15 Years From Now”

the Council tax plan is a large document in itself, but its main provisions are relatively simple. The bill would phase out the income tax, eliminating the remaining brackets entirely by the early 2030s, based on annual state revenue growth. In addition, the plan would provide a 35% tax credit for car tag purchases and reduce the state grocery tax, step-by-step, by up to 4%, progressive sweeteners in a plan otherwise economically regressive.

The plan aligns perfectly with a long-standing Conservative agenda, backed by national Tories political mills like the American Legislative Exchange Council, to eliminate state income tax in the name of stimulating economic growth. last september, Gunn held hearings on the pillars of his tax plan, relying on the support of minimal government defenders like Grover Norquist.

Mississippi’s own state economist, Corey Miller, suggested during Gunn’s hearings that the downstream economic effects of income tax tinkering might be limited.

“In my view, the lack of consensus…on the effects of state tax systems on regional economies indicates the limits of fiscal policy at the state level (and) is also consistent with the findings of research from the (Centre academic research), that is, changes to state taxes in Mississippi are likely to have marginal effects on economic growth, employment, and population,” Miller said at the time.

Gunn is the immediate past president of ALEC., which often provides model legislation to start legislatures.

To offset the cost, general sales taxes would increase under the house plan from 7% to 8.5%, although the plan intentionally avoids increase sales tax on large-scale agricultural implements, such as tractors. Direct changes to the state sales tax are another part of the plan that would affect poorer Mississippians more directly than an income tax cut.

The bill passed through its chamber, facing an airy vote that returned it to the Senate with 96 representatives in favor and 12 against. The limited opposition that existed came entirely from House Democrats, although almost as many Democrats did not vote or voted present instead.

Rep. Trey Lamar, R-Senatobia, chairman of the House Ways and Means Committee and one of the bill’s multiple sponsors, encouraged lawmakers to consider the bill part of their legacy. “Fifteen years from now, I wouldn’t want to be the elected official solely responsible for the fact that we have an income tax in this state,” Lamar warned.

After a previous attempt to pass the bill in the last session and additional hearings on the issue between sessions, little discussion accompanied the bill’s early introduction and passage.

Currently no earned income tax credit

Only Rep. Zakiya Summers, D-Jackson, offered a significant amendment ahead of Wednesday’s vote.

Summers’ amendment, ultimately rejected, would have created a state income tax credit, equivalent to 15% of the taxpayer’s federal income tax credit. This credit reduces the tax burden and potentially provides a tax refund to individuals and families earning low to moderate wages.

Rep. Zakiya Summers, D-Jackson, was one of 12 Democrats to vote against the income tax elimination bill and proposed an unsuccessful amendment to add an income tax credit won at the proposal. Photo courtesy of Zakiya Summers

Summers explained in an interview that his amendment was intended to follow the general spirit of tax reform. “I tried to think of something that wouldn’t be contrary to what they were trying to do – that would add to their statement of putting money back in people’s pockets.”

Summers’ amendment follows Washington State’s income tax elimination plan. “They’ve eliminated state income tax, but they’re also offering a state tax credit based on how many kids you have, or if you don’t have any kids from everything,” the rep explained.

Lamar, speaking against the amendment, cautioned he couldn’t gauge its effect on the cost of the overall bill, but didn’t hold back from working with Summers later in the session over credits. tax for low income people.

Summers, speaking to the Mississippi Free Press, explained that while Lamar may have had little time to review her amendment, she herself had little time to review the entire tax bill. “The bill was introduced (on the ground) so quickly that we didn’t even have time to digest it and study it.”

The Jackson Democrat was one of 12 to vote against the bill.

Tax reform that weathers the storms

If an income tax bill lands on the governor’s desk this session, it could be with or without the consent of a single Democrat in the Legislature, though Wednesday’s vote indicated that this support exists anyway. A harder nut to crack will be the opposing chamber – with its own personalities, leadership and fiscal philosophy.

The Senate is in no hurry to erase the tax debate from the legislative agenda. After the House passed his tax plan, Sen. Harkins told the Mississippi Free Press that he should soon receive the Senate version. “The deadline for even introducing revenue bills is a long way off. So there’s no rush to put something right now, … I think it’s more important to do it right than to do it in a hurry.

Harkins declined to provide details on the next tax bill, but pointed to previous tax reform — such as the bill passed under Governor Phil Bryant in 2016 to eliminate the 3% tax bracket — as proof that budgetary responsibility would be a pillar of the Senate. approach.

“We’ve demonstrated in the past that we’ve been careful and careful not to put a dent in our budget,” Harkins said. “(The 2016 bill) added the unemployment insurance deduction and phased out the franchise tax over 10 years. We’re in the fourth year out of 10. We’re still reducing a lot of the most important tax cut in Mississippi history; we’re only halfway through a game.

As Harkins explains, the challenge for the Senate plan — and likely for the House plan when it arrives in this chamber — is balancing the cuts with projected revenue, the projections that the finance chairman fears will not. not be as abundant as they have been in recent years. .

Interior view of the Mississippi Legislative Hall with people at work
House Speaker Philip Gunn, R-Clinton, quickly presented his tax plan to the House at the start of the session. Photo by Nick Judin

Mississippi state revenues have exceeded its forecast and significantly increased from last year, revenue growth that the House intends to use in part for the elimination of income tax. Senate leaders may be anticipating a slowdown in this growth, which could complicate any tax reform.

“I don’t think anyone thinks the pursuit of revenue growth is going to continue at the pace we’re at right now,” Harkins said. “Nobody has a crystal ball, but we need to figure out what is a responsible and reasonable expectation of where our income will be.”

Harkins, for his part, sees longevity as the keystone of a working tax reform plan. “Even when we had the hearings this summer, I said any tax code we put in place had to be sustainable,” he said. “It’s got to stand the test of time and weather the storms and make sure we return it in good condition… It doesn’t make sense for us to come here to try and cut taxes if we can’t be at the height and budget for it.”

the the specter of Kansas’ ill-fated tax plan is frequently invoked in debates on tax reform. Harkins told the Mississippi Free Press that Mississippi could avoid the Kansas disaster with better planning.

“I think Kansas was doomed when they set sail. Cold turkey, they cut a lot of taxes and they increased spending by a couple hundred million dollars. It’s just a recipe for disaster,” did he declare.

In the past, Lt. Gov. Delbert Hosemann has been the emergency brake on Mississippi’s income tax elimination train, challenging the proposal in its earliest forms as endangering the state budget.

“That’s a $2 billion question,” Hosemann told this reporter in 2020. “I am open to any solution to this. But, until we have a solution… it’s not ‘Field of Dreams.’ I do not print money. We have to have enough funds to pay for highway patrols, education, all the other things we pay for as a state.

Last Monday, Hosemann told the press at the Capitol expect tax reform that touches on many issues, not just income tax. “I think you will find that our plan is multidimensional. … We’re not hooked to a specific thing that says we eliminated something.

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