Jason White hopes to learn from the ambitious 2022 plan of his predecessor – former Mississippi House Speaker Philip Gunn – to reduce the state’s tax on groceries and eliminate the personal income tax.
White recently announced his intention to form a select committee of House members to look at the state’s tax structure in advance of the 2025 legislative session.
White hopes as a result of the study to:
- Cut the state’s 7% tax on groceries in half.
- Phase out the personal income tax.
- Develop an additional stream of revenue for state transportation needs. The Mississippi Department of Transportation’s primary state source of revenue is an 18.4-cents-a-gallon tax on motor fuel. Transportation officials say that is not enough.
White said he hopes the task force can create consensus on how to achieve his goals.
Such consensus never materialized in the 2022 session when Gunn and other members of the House leadership, including then Speaker Pro-Tem White, unveiled a plan to phase out the income tax and cut the state’s 7% tax on groceries.
To at least partially make up for the loss revenue from the tax cuts, the 2022 plan would have increased the 7 cents on the dollar sales tax on most retail items, excluding groceries, by 2.5 cents. In addition, the 2022 plan would have increased the sales tax on other items that currently are taxed at lower levels, such as automobiles and farm implements, by 2.5 cents on the dollar. Various groups that would be impacted by the sales tax increase vocally opposed the effort and played a key role in ensuring the plan did not pass.
Referring to the 2022 effort, White recently said, “We probably learned a valuable political lesson. A lot of folks got really upset really fast because it impacted a lot of different industries … so lessons learned there.”
While Gunn was unsuccessful in passing his plan, the Legislature in 2022 did approve a major, $525 million reduction in the state income tax that will be fully enacted in 2026.
But accomplishing the goal of completely eliminating the income tax and cutting in half the 7% grocery tax would have a much larger impact on state revenue. The income tax generates about $2 billion a year while it has been estimated, based on a 2019 study, that the grocery tax generates about $325 million a year. But the grocery tax would generate much more now than in 2019 because of the significant increase in grocery prices. Since the 7% sales tax is imposed on the cost of groceries, state Economist Corey Miller has said that inflation has provided significantly more revenue from the grocery tax in recent years for the state.
Despite the pitfalls, White is optimistic that a consensus on tax reduction can be reached for the 2025 session. He pointed out that Lt. Gov. Delbert Hosemann, who presides over the Senate, has expressed support for reducing the grocery tax while Gov Tate Reeves has been a vocal advocate of phasing out the income tax. But in 2022, Reeves was critical of Gunn’s plan because it increased the general sales tax.
Reeves’s office did not respond to questions about White’s intention to form a select committee to study the tax structure.
White pointed out that the general sales tax in Mississippi’s four contiguous states is higher than the 7% rate in Mississippi when factoring in the option local governments in those states have to impose a sales tax. City and county governments in Mississippi do not have the option to levy a sales tax. Instead, municipal governments receive 18.5% of the sales taxes the state collects within their borders.
White said an option in Mississippi might be to reduce the overall sales tax, but give local governments the option to impose a sales tax. But at the same time the local governments might lose the 18.5% share of the state sales tax they normally receive.
White said the overall goal would be to ensure the local governments “are made whole” while imposing a net reduction in taxes paid by Mississippians.
“That is not only tricky math but tricky politics,” White conceded. “Certainly we want to maintain our cities.”
But in accomplishing his goals, White said revenue would need to be provided to the state to ensure vital services are met.
That might be the trickiest part of the effort.
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