Dueling Tax Cuts Compete to Hurt Mississippi
Members in the Mississippi Senate chamber approved a tax cut that only marginally ruins the state’s budget compared to even more devastating proposals coming from the House.
The Republican supermajority is considering two different bills to hollow out the state’s budget at a time when consumer prices are exploding across the nation and state schools are woefully underfunded. Senate Finance Chairman Josh Harkins, R-Flowood, shepherded Senate Bill 3164 through Senate debate last Wednesday with a 40-to-11 vote, passing the bill and sending it to the House for consideration. If the GOP majority on the House side approves the bill it will put a $446 million drain on state resources, according to Harkins.
Harkins proposed that the tax cut will cost the state $446 million while fully funding legislators’ commitment to raise teacher pay. He added that it allegedly “does not blow the budget,” funds itself with reoccurring expenses and does not raise sales taxes.
“Married couple filing jointly wouldn’t pay taxes on the first $26,600 they make,” Harkins told senators.
The bill would reduce the state grocery tax by two percent, from seven percent to five percent, and completely phase out the state’s four percent income tax bracket. It also erases the state’s portion of residents’ car tag fees, saving car owners up to $5 a year (enough for a cheeseburger!). Additionally, it will issue a rebate check between $100 to $1,000 to Mississippi taxpayers, although very few residents will see a $1,000 check.
Right-wing radio personality Sen. Chris McDaniel argued on the Senate floor that the bill didn’t do nearly as much as he wants. McDaniel wants the state’s income tax phased out completely, despite even more pronounced financial consequences of that move. While arguing for even more drastic cuts, McDaniel made an excellent argument against SB 3164, however.
“The real-world ramifications to a taxpayer … if we pass this bill, the respective taxpayer will get about a $50 break per year on their taxes. Correct?” McDaniel asked Harkins.
“But also, a rebate check capped at $1,000,” Harkins added.
“(But) to get the full $1,000, a person would have to make around $400,000 a year, right?”
For a moment, Harkin looked stunned. “How much?” he asked.
“About $400,000 per year to take advantage of the full $1,000. Right?” McDaniel pressed.
“It’s a five percent rebate of whatever their (tax) liability is.”
“Yeah, that’s roughly what the math is. So, the reality is only a very small percentage of our population will ever realize the $1,000 rebate,” McDaniel said. “There will be others, of course, and the numbers will be far smaller.”
The dialogue suggests McDaniel is a champion of fiscal responsibility, but he was actually advocating for a bigger bonus from an even more over-the-top cut: “If we take this action now, we’ll be depleted by at least $440 million, but we’ve taken no real action toward eliminating the income tax.”
McDaniel and his legislative fiscal wrecking crew may get an even better chance to deep six the budget with the House bill competing with SB 3164. The Lighthouse previously covered House Bill 531, which would sweep the entirety of the state’s income tax out the door and hollow out a budget already collapsing from underfunded mandates, all while putting new costs on the state’s impoverished population through a 1.5 percent sales tax hike on most retail items.
Kamolika Das, a policy analyst with the Washington, D.C.-based Institute of Taxation and Economic Policy, warned that HB 531 is an unsustainable budget killer targeting everyone making less than $19,000, as well as older adults on fixed incomes. Just so wealthy Mississippians can sop up the majority of the tax breaks.
“We found that a third of the net tax change would go to the top percent of earners (under HB 531), and that means people making more than $485,000 in total income,” Das told The Lighthouse. “And if you look at the top five percent—people making more than $200,000—that’s nearly half the tax change.”
Education advocates like Parents’ Campaign Executive Director Nancy Loome say the state is already blowing off teachers and failing to keep roads and bridges functional. Other critics warn that killing more than one-third of the state’s revenue will make Mississippi the next Kansas, which infamously committed fiscal suicide in 2012 and 2013 when it ended its own state income.