Mississippi Republicans want to raise sales taxes, eliminate personal income tax

Republicans in the Mississippi House of Representatives want to radically change state tax policy and shift the burden of paying for state government operations.

House Speaker Phillip Gunn (R-Clinton) leads the movement that would sharply increase state sales taxes while eliminating the state individual income tax over a period of about 12 years.

What would the Republican proposal mean to Mississippians?

The state currently collects about $2.2-billion each year in personal income taxes, about a third of the $6.6 billion annually in the state general revenue fund.

Starting with the 2022 tax year, the House GOP plan would exempt the first $40,000 in personal income from the state income tax. That would mean that about half of Mississippi taxpayers would not pay any state income tax in 2022.

A “talking points” document circulated by the plan’s supporters say exempting the first $40,000 from the income tax would cost the state treasury about a billion dollars. (See link below for full “talking points” content.)

Assuming certain levels of growth in the state economy and shifting the tax burden to other revenue sources, the GOP proposal would eventually completely eliminate the state personal income tax.

How would the state replace the eliminated income tax revenue?

However, to offset the billion-dollar loss in income tax revenue, the Republican tax plan would create a huge increase in the tax on most items now subject to the state sales tax. The current sales tax on most items is 7%. The GOP plan would increase the standard sales tax to 9.5%, a thirty-six percent increase. The plan does decrease the sales tax on groceries from 7% to 3.5%. That’s only on the food items; you would, under the GOP plan, pay the full 9.5% sales tax on toilet tissue, laundry detergent and the many other non-food items routinely purchased at “grocery” stores.

Furthermore, the sales tax on prepared foods – items you buy from fast food and other restaurants would increase by 2.5%, again a 36% increase. Drive through Mi Pueblo and buy $40-worth of burritos etc. for your family, and it will cost you an extra dollar. That’s on top of the $3.60 you will already have paid in state sales tax and local tourism tax, thus a 27% increase in the total sales taxes you pay for your $40 in Mexican carry out.

The GOP-proposed tax plan also includes a sharp increase in the amount of sales tax paid on the purchase of a motor vehicle. The current sale tax on a new car is 1.5%. That tax would increase to a full 4% under the House GOP proposal.

Buy a $25,000 car today and you pay $375 in sales tax. Under the proposed GOP plan you would pay a sales tax of $1,000 on the same vehicle, an increase of $625- over 2.6 times the current tax.

Speaker Gunn’s talking points state that sales tax would not increase on farm machinery, prescription medicine, gasoline and numerous other items. However, these items are already exempt from Mississippi sales tax.

Gunn and his GOP supporters argue that the proposal to increase the sales tax and eliminate the personal income tax will attract new residents and new businesses to Mississippi, thus spurring economic growth.

What opinions do others have regarding the tax changes?

However, Scott Waller, president of the Mississippi Economic Council (MEC, the state “chamber of commerce”) told the Joint House and Senate Tax Study Committee on Thursday, August 26, that the GOP proposal does not have the support of the business organizations MEC represents.

Waller addressed his remarks directly to Speaker Gunn.

“Where is this in the priorities we have?” Waller asked Gunn. “We’ve been on the road, holding 39 meetings with members all across the state. I know you don’t want to hear this, Mr. Speaker, but this issue (personal income taxes) has not come up a single time as a priority, something we want to do.”

Waller said the state’s business leaders are more interested in education and workforce development, improving infrastructure (roads and bridges), and stopping the “brain drain” of educated people leaving the state.

State Senator Hob Bryan (D-Amory) opposes the GOP tax plan. While not yet 70 years old, Bryan has served in the state senate for 37 years and is its longest serving member. He is a graduate of Mississippi State University and the law school of the University of Virginia

Mississippi is one of only three states that has lost population during the past ten years.

Pat Fontaine, representing the state’s restaurants, said the proposal would be bad for business, resulting in fewer people dining out in the state’s restaurants.

Kyra Roby, representing the non-profit One Voice organization, told the lawmakers Thursday that the GOP tax proposal would increase the tax burden of lower income people, those in the bottom 60% of household income while decreasing the taxes paid by those in the top 40% income brackets.

State Senator Hob Bryan (D-Amory) argues that this is the worst possible time to consider any tax cut in Mississippi with education underfunded and roads and bridges around the state needing improvement.

Referring to the GOP tax plan, Bryan told NEMiss.News in a Friday evening telephone conversation, “It is very, very bad public policy. It would shift the tax burden from the wealthy, and taxes for ordinary people would go through the roof.”

The GOP tax proposal cannot be considered again until the legislature meets in January, 2022. The House brought the measure up in the last legislative session, but it did not progress in the state senate.

“I hope the Senate will not take it up,” said Bryan.

Republican Talking Points on MS Tax Freedom Act as Amended (6-11-2021)