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Mississippi GOP to Use Biden Incentives to Fund More Tax Cuts

Mississippi Republican leaders are halfway to jettisoning one-third of their state budget this legislative session with only one hurdle left: the Senate.


On Thursday, Jan. 16, House leaders passed a bill that slashes more than $1 billion from a state already known for potholes, failing infrastructure and deteriorating health services. House Bill 1, now headed to the Senate, gradually reduces the state’s income tax rate from 4% to zero in 10 years, long after its sponsors are no longer around to deal with the consequences.


This year, the total revenue estimate for the state is $7.5 billion, with individual income taxes comprising a $2.1 billion chunk of that. Critics expect major impacts upon already failing state government services.


One of countless warning signs on non-functioning restrooms in Mississippi state parks and neglected green-spaces. This one adorns a busted bathroom in the scenic Rocky Springs nature area. A frustrated critic has left their opinion on the matter.  Photo credit: Adam Lynch
One of countless warning signs on non-functioning restrooms in Mississippi state parks and neglected green-spaces. This one adorns a busted bathroom in the scenic Rocky Springs nature area. A frustrated critic has left their opinion on the matter. Photo credit: Adam Lynch

"Tax cuts at the state level always put the burden on local taxpayers,” said Sen. John Horhn, D-Jackson, who is running for mayor of Jackson and is leery of new county and municipal fees. “Municipalities and county governments wind up on the losing end, but what we’re really afraid of is public education being on the losing end. I’m personally afraid this is a veiled attempt to gut public education in the state.”

 

Republican leaders unveiled the “Build Up Mississippi Act” this month to crank the chainsaw, with the blessing of Gov. Tate Reeves. In addition to flushing the income tax, the bill also slices the state’s exorbitant 7% sales tax on groceries, which is some of the highest in the nation. Sales taxes on essential items like eggs and milk generate more than 45% of state revenue, and Republican leaders purport to reduce the economic strain on local families by paring that 7% down to 2.5%.


Under a sales tax scheme, a three-person family making $2 million a year pays the same amount of taxes as a three-person family making $13,000 a year for the same amount of eggs. 

Roughly half of Mississippians qualify as “working poor,” and critics say decreasing the grocery sales tax would make Mississippi’s tax less regressive. But the bill comes with caveats. Currently, both the state and your local government gets a cut of your eggs and milk, but Mississippi Republicans plan to grab the full 2.5% of sales taxes that’s left after they’ve reduced it from 7%. The bill allows city or county officials to go back in and impose a brand new 1.5% sales tax to recover the money the state snatched. It also allows them to “opt out of imposing the tax,” but they will do so at the cost of busting their budgets.

 Wealthy districts like Madison and Rankin counties may be in a position to opt out, but lower income districts will have no choice but to impose new taxes and possibly annoy their voting public.

 

The brunt of the legislation steers Mississippi to a more consumption-based tax scheme that hits the state’s low-income bracket hardest. Poor or low-income individuals, who comprise a whopping 46% of the state’s population and are disproportionately Black, are in no position to cut their minimum purchases any further. Wealthy households, however, can avoid the new hit by simply reducing their consumption of luxury items. Under a sales tax scheme, a three-person family making $2 million a year pays the same amount of taxes as a three-person family making $13,000 a year for the same amount of eggs.

 

In addition, the legislation creates a tax swap by adding an extra 5% tax to gasoline sales for road and bridge upkeep, on top of the roughly 18 cents a gallon the state already charges.



Lesson Not Learned


States like Florida and Texas also have no individual income tax, but Florida has a bountiful tourist industry to offset the hole while Texas benefits from considerable oil and mineral revenue. Mississippi has none of that, and neither did Kansas when Republicans there learned the hard way about flushing a significant portion of revenue in 2012. That year, Kansas Gov. Sam Brownback and the GOP legislature cut the top rate of Kansas’ income tax by almost 30% and the tax rate on certain business profits to zero. Brownback declared the tax cuts “a shot of adrenaline into the heart of the Kansas economy,” but Kansas revenues plunged, leading to severe cuts to education and vital services as well as whacking the state’s bond rating. 


Former Kansas Gov. Sam Brownback left office under a cloud of debt after a slate of draconian tax cuts nearly bankrupted the state of Kansas.
Former Kansas Gov. Sam Brownback left office under a cloud of debt after a slate of draconian tax cuts nearly bankrupted the state of Kansas.

By 2017, the Kansas legislature ended Brownback’s “experiment” and repealed his tax giveaway to businesses and the wealthy. Brownback resigned as governor the following year. Eight years later, the smell from Kansas has apparently evaporated, and Reeves and his cohorts are on to the next “Brownback Bust.”


Anti-tax advocates like Americans for Tax Reform founder and President Grover Norquist assured Mississippi legislators in 2022 the Kansas Experiment would have been a success had Kansas legislators merely followed up the cuts with brutal spending caps.


“The best way to do this (eliminate state income tax) is to install an overall cap, and then the various spending groups can argue with each other as to whose project is more necessary or how much,” Norquist told GOP legislators. “Nobody looks for waste unless there’s a cap. […] A cap forces the spending interests to compete with each other.”


Norquist said the resulting fight for life between public schools, police, and infrastructure would slash government costs, reduce Mississippi’s cost of living and make it a beacon for new business and residents. But Mississippi already has some of the lowest cost of living in the nation, according to the Mississippi Development Authority. When BGX caught Norquist at the state Capitol and asked why he doesn’t own a home here in this “beacon” of conservative ideals he chuckled and kept walking.

Americans for Tax Reform founder and President Grover Norquist says state agencies should squabble over more limited funds for tax cuts to work. Photo credit: Adam Lynch
Americans for Tax Reform founder and President Grover Norquist says state agencies should squabble over more limited funds for tax cuts to work. Photo credit: Adam Lynch

Reeves has pushed for the elimination of the tax before but has been stymied in past years by the Senate. This year, State auditor Shad White, Agriculture and Commerce Commissioner Andy Gipson, and Treasurer David McRae all support his venture. Gov. Reeves called them “patriots … willing to take a stand to let you keep more of your hard-earned money” on “X” this week.

 

Other Republican talking heads claim the state has profited from tax cuts in the recent past, so more cuts should deliver an even bigger boon.

 

“The state of Mississippi has implemented multiple tax cuts over the last decade, including two significant individual income tax cuts. In that same period, tax revenue to the state grew by 39%, to nearly $11 billion annually,” said Russ Latino, founder & CEO of the Magnolia Tribune.


Legislators cut the state income tax in the 2022 legislative session when they erased the 4% tax bracket on residents’ first $5,000 of taxable income. However, Latino is omitting an important detail.



A History of Slump


Sen. David Blount, one of many Democrats railing against HB1, pointed out that proponents’ claims of a robust budget is not assured over the next decade, particularly since the state of Mississippi owes Latino’s vigorous budget to federal pandemic relief and economic incentives, which ended with the pandemic. In fact, many states are already seeing a decline.

 

"Latest budget numbers show collections are down 2.8% from this time last year. Corporate income tax down 48%. Other states (are) similar as federal spending gets back to normal,” Blount wrote on X. “Time to pause further income tax cuts. Teacher pay and shoring up retirement system should be priority.”

 

A January Pew Charitable Trusts report confirms inflation-adjusted tax revenue did indeed fall in 40 states in fiscal year 2024, compared with the previous year’s collections, “marking the first consecutive years of decline for most states since the 2007-09 Great Recession.”

 


Pew added “most states saw more moderate annual declines than they did in fiscal 2023, reflecting a return to growth rates more aligned with historical norms after four years of extreme fluctuations.”

 

The problem in Mississippi, however, is the state’s “historical norm” is rubbish without generous federal incentives. Mississippi’s economy routinely slogs behind that of other states. Its revenue was lagging in 2017, even as the rest of the nation prospered.

 

State economist Darrin Webb told legislators in 2017, “it’s been very discouraging,” with sales taxes lagging even though the state and nation were not in an official recession. In fact, this was at the height of the “prosperous” Trump economy, which allegedly got Trump re-elected last November. Despite the low price of eggs Trump claimed throughout his 2024 campaign, Mississippi’s economy resisted all signs of life until the federal government and the Biden administration handed down a flurry of pandemic-mitigation money in the form of enhanced unemployment benefits and child care payments and nearly $6 billion in infrastructure and Green New Deal-related incentives. In 2020, federal money washed Mississippi coffers as the pandemic raged, pushing state revenue collections 30% above what it was the previous year and giving Latino and Reeves cover for inflating the benefits of state income tax cuts in 2022. Horhn said Republican leaders in the House are playing ignorant about the temporary, source of the state’s healthy budget, and are refusing to discuss reality.

 

“The question of how city and county governments will operate amid these shortfalls leaves a lot of questions that no one on the House side seems willing to answer. They’re just saying ‘well, we’ll figure it out further down the road,’” Horhn said.

 

As of Thursday, Horhn said Lt. Gov. Delbert Hosemann has indicated support for a reduction of the state’s onerous grocery tax but has not broadcast unfettered backing of HB1 in its current form.

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