Mississippi has the nation’s lowest per capita income at $46,248 annually and the highest percentage of people living in poverty at 18.2%.
Yet the state’s tax structure does little if anything to try to offset those statistics for the state’s poorest citizens.
In fact, the tax structure does more to harm the poor than to help them. Mississippi’s low-wage earners pay a greater percentage of their income in state and local taxes than do the state’s more affluent residents, a recent study found.
A January report by the Institute of Taxation and Economic Policy found that Mississippi has the 19th-most regressive tax system in the nation, where low-income residents are forced to pay a larger percentage of their income in taxes than the state’s wealthier citizens.
The study shows the income tax is the only tax that requires wealthy Mississippians to pay more than the poor. Gov. Tate Reeves wants to eliminate the income tax. The personal income tax already has been cut twice in recent years. In addition, multiple tax cuts for businesses also have been enacted or are being phased in.
Currently, a $525 million reduction in the income tax is being phased in plus the state also is phasing out a major tax on businesses. Instead of eliminating the income tax, Kyra Roby, policy analyst for One Voice, which advocates for the poor in Mississippi, said that tax cut should be reversed and that the state should add a 6% income tax bracket for those earning more than $100,000 annually.
According to the Institute of Taxation and Economic Policy report, the bottom 20% of Mississippi wage earners — those earning less than $19,300 — pay 12.4% of their income in state and local taxes, which is more than any other income group.
By contrast, the top 1% in Mississippi — those making more than $362,300 annually — pay 6.9% of their income in state and local taxes. The next 4%, earning between $182,500 and $362.300, pay 8.2%, and the next 15%, earning between $104,800 and $182,500, pay 9.6%.
What makes the Mississippi tax system so punitive for the poor is primarily the state’s sales tax. Mississippi’s 7% sales tax on most retail items is among the highest in the nation. And the state’s 7% sales tax on food is the highest statewide grocery tax in the nation. Sales taxes and excise taxes, such as those levied on internet sales, are viewed as being more of a burden on the poor than on the wealthy. The tax on food is considered particularly punitive for the poor since it requires a poor person to pay a greater percentage of their income for a necessity than the wealthy.
Reeves has long advocated for eliminating the income tax as has much of the House leadership in recent years. Reeves argues that eliminating the income tax would boost the state economy and help working Mississippians. Reeves cites three states that he says he wants to emulate in eliminating the income tax: Texas, Tennessee and Florida. Interestingly, all three, like Mississippi, have a greater percentage of their residents living in poverty than the national average.
While House leaders have in the past voiced support for Reeves’ plan to eliminate the income tax, Lt. Gov. Delbert Hosemann, who presides over the Senate, has said he would support further tax cuts, but stopped short of endorsing a complete elimination of the income tax this year. Hosemann also said a cut and possibly an elimination of the grocery tax should be considered.
Although it is generally conceded that eliminating the grocery tax would be more beneficial to poor Mississippians, that decision would have much more of an impact on state revenue.
Research in 2019 conducted by the campaign of Jim Hood, the unsuccessful Democratic candidate for governor that year, estimated that the complete elimination of the grocery tax would cost the state $327 million annually. The personal income tax generates more than $2 billion annually in state revenue, though that number could drop in future years as the $525 million tax cut enacted in 2022 is phased in.
Reeves has never been an advocate for reducing or eliminating the grocery tax, though many other Republican policymakers have in the past.
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