This article first appeared on the Magnolia Tribune.
Ways and Means Committee Chairman Trey Lamar, R-Senatobia, (AP Photo/Rogelio V. Solis – Copyright 2023 The Associated Press. All rights reserved.)
- “This is a transformational piece of legislation,” State Rep. Trey Lamar told Magnolia Tribune. “It totally reforms the state’s tax system.”
The Mississippi House of Representatives will file its bill to eliminate the state income tax on Friday, according to House Ways and Means Chairman Trey Lamar (R). Rep. Lamar said the legislation will cut the roughly $2.2 billion individual income tax over the next ten years, while making additional sweeping adjustments to the tax code.
In total, Rep. Lamar said House Bill 1 will net a $1.1 billion tax cut for Mississippians, along with additional dedicated revenue to transportation and Mississippi’s retirement system.
“This is a transformational piece of legislation,” Lamar told Magnolia Tribune. “It totally reforms the state’s tax system.”
In teasing the package Thursday at the Mississippi Economic Council’s Capital Day, Speaker Jason White (R) said the package should be viewed through “a singular lens.”
“It is worth the effort,” White said, asking business leaders gathered at the event to back the measure as the state moves to a consumption-based economy.
In addition to the income tax cut, the bill proposes to phase down the sales tax applied to groceries from the current rate of 7 percent to 2.5 percent at completion. Changes to the sales tax structure on items outside of groceries would partially offset the cuts.
Under current law, Mississippi’s 7 percent sales tax is split between the state and the municipalities where the tax is collected. The House legislation proposes to end the sales tax diversion to municipalities, meaning the full 7 percent sales tax will bolster the state’s budget. The bill then adds a 1.5 percent local sales tax for both municipalities and counties.
Speaker White said Thursday the move would keep cities and towns whole, and some could see a “slight increase.”
Local sales taxes collected by counties will be directed to the Office of State Aid Roads. Rep. Lamar estimates the change will net an additional $80 million annually for county road projects.
The Mississippi Department of Transportation would also receive a new dedicated revenue stream should the legislation become law. Currently, the state of Mississippi collects an 18.4 percent fuel excise tax on every gallon of gas sold, but exempts the purchase of fuel from a per dollar sales tax. Under the House proposal, a 5 percent sales tax would be added. Rep. Lamar told Magnolia Tribune this would net MDOT approximately $400 million a year in additional funds.
When the Mississippi lottery passed, the Legislature allotted $80 million a year in lottery proceeds to MDOT. Under HB 1, those funds would be shifted from MDOT to supplementing the state retirement system. The Legislature would commit to add $100 million annually from lottery proceeds to PERS until the system’s long-term liabilities were funded at 80 percent, according to Lamar. The remainder of lottery funds would be split between education and multi-modal transportation, meaning the state’s ports and railways.
The House proposal comes as Governor Tate Reeves (R) has reiterated his desire to erase the state’s income tax to make Mississippi more competitive for citizens and businesses and has called on other state leaders to join him.
Cost projections were not immediately available Friday morning.
“This is the largest tax cut in Mississippi history times two,” Rep. Lamar said.
Senate Finance Chairman Josh Harkins (R) said Friday that the state Senate is expected to release its own tax cut plan in two weeks. Previews from the Lt. Governor’s office included a plan to reduce Mississippi’s flat income tax from 4 percent down to 3 percent by 2030 and to immediately reduce the sales tax on groceries down to 5 percent.
In 2022, the Legislature passed a law to create a 4 percent flat income tax that on the present schedule will not be fully phased in until 2026.
Senator Harkins said it is too early to talk about any Senate tax proposals in detail.
“I haven’t seen any proposals in a bill. I’ve just heard some thoughts. People have pontificated on it, but I haven’t seen anything,” Harkins said.
This article first appeared on the Magnolia Tribune and is republished here under a Creative Commons license.
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