The Senate is moving forward with a bill that removes roughly $300 million from the state’s general fund every five years. Senate Bill 3095 delivers an income tax cut to a state with an already tiny income tax footprint compared to many others. The bill sweetens the deal, however, by also reducing the Mississippi’s regressive grocery tax from an onerous 7% to a slightly more reasonable 5%, should it become law.
Under the proposed law, Mississippians will see an individual income tax reduction from 4% to nearly 3% by 2030, making it the third lowest income tax of more than 40 states that resort to one. However, Mississippi still has the highest grocery tax in the nation among states that impose the regressive tax.
Additionally, the bill imposes a 3-cent-per-gallon increase on the state’s 18.4 cent gasoline tax, raising it to 21 cents per gallon this year, if implemented. That increase would bounce up an additional 3 cents in 2026 and 2027, adding up to a total 27 cents per gallon. Lt. Gov. Delbert Hosemann intends to use the hike to fund $212 million in much needed infrastructure work.
Next, Senate Bill 3095 is the Senate’s response to the somewhat insane House Bill 1, which if passed, would reduce the state’s income tax rate from 4% to zero in 10 years, long after supporters like Gov. Tate Reeves and supporters are gone and not having to deal with the subsequent insolvency of the state budget. The most recent total revenue estimate for the state is $7.5 billion, with individual income taxes comprising $2.1 billion of that. Needless to say, the House bill eradicating the income tax entirely would come with serious risks. That bill is presently stalled in the Senate, much to House Republicans’ ire.
State officials, like economist Darrin Webb, recently made clear to legislators that the state’s economy was in poor position to slash the revenue from its income tax, particularly with sales tax revenue lagging. Webb described the state’s sales tax revenue as historically “very discouraging.” The only increase it experienced in recent history came courtesy of federal COVID-mitigating investments, not the wisdom of Mississippi lawmakers. Enhanced unemployment benefits, childcare payments and nearly $6 billion in infrastructure and Green New Deal-related incentives provided deep red state Mississippi a rare boost to its coffers, which the Republican governor many Republican leaders want to quickly steer to tax cuts.
Today Mississippi sales taxes are back to their traditional slump as federal COVID relief wanes, with Sen. David Blount pointing out that "latest budget numbers show collections are down 2.8% from this time last year,” and corporate income tax is down 48%. A January Pew Charitable Trusts report confirmed that inflation-adjusted tax revenue was falling in 40 states in fiscal year 2024, compared with the previous year’s collections.
Comments