The fight to eliminate the state income tax in Mississippi lives to see another day.
On Monday, committees in the Mississippi Senate and House of Representatives gutted one another’s tax reform bills and adopted amended proposals. One day later, each chamber held a floor vote on their respective proposals and both moved forward with different plans to:
Slash the income tax Lower the grocery tax Provide a stream of recurring funding for infrastructure projects Address the state’s public employees’ retirement system
Here’s what the Senate and House are proposing:
The Senate’s new plan to cut taxes
For the first time, the Senate has acquiesced to calls to eliminate income tax. The Senate’s rendition of House Bill 1 passed 32-16 on Tuesday.
The chamber’s proposal cuts the income tax from 4% to 3% between 2027-2030 with plans for future cuts down to elimination contingent on economic growth. For example, if Mississippi has a rough year financially after 2030, guardrails are in place to prevent a tax decrease that year. However, according to Hosemann, the goal is full elimination.
As was part of the Senate’s original plan to cut taxes, Mississippi’s nation-leading sales tax on groceries would drop from 7% to 5% in July 2025 to give consumers relief at the checkout line.
The Senate has also kept its 9-cent increase to the excise tax on gas intact. 74% of revenue accrued would go to the Mississippi Department of Transportation, 23.25% to the State Aid Road Construction Fund, and 2.75% to the Strategic Multi-Modal Investments Fund for infrastructure upgrades.
A major shakeup in the updated legislation is moving new state employees to a Tier 5 retirement plan under PERS. This would apply to those who take state jobs after March 1, 2026. A measure approved by the PERS Board of Trustees in 2024, Tier 5 would reform the benefit structure for future state workers to rectify concerns about the financial viability of the program.
The House’s new plan to cut taxes
The House’s modified version of its original tax reform plan, which passed 90-26 on Tuesday, now incorporates an immediate reduction
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