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Hearings underway as lawmakers study income tax elimination

Mississippi Capitol Building

Hearings have begun at the capitol as lawmakers discuss the possibility of eliminating Mississippi’s income tax after the debate dominated the latter stages of the 2021 legislative session.

A proposal to eliminate the tax over a 10-year phase-out period was introduced and passed by the House during the session, but it failed to gain similar traction in the Senate with the chamber opting to study the issue ahead of the 2022 session.

While Governor Tate Reeves, Lt. Governor Delbert Hosemann and Speaker of the House Philip Gunn—who had a hand in crafting the legislation—seem to agree on the end result of eliminating the income tax, there appears to be some disagreement on how to get there.

Under Gunn’s plan, the elimination of the income tax would be accompanied by a 2.5% raise in the state sales tax, bringing it up from 7% to 9.5%. During a press briefing Monday, the governor expressed that he remains opposed to raising taxes in other areas to offset the loss of revenue generated by the income tax.

“I hope that once the hearings are over, the legislature will realize that eliminating Mississippi’s income tax is needed and reducing the tax burden on Mississippians across the board is the best way to ensure our state’s economic prosperity. I hope that once the hearings are over, the legislature will realize that the best way forward is to not swap the income tax for increases in sales taxes, agriculture taxes, and other taxes,” Governor Reeves said.

Gunn has described his policy, which also cuts the grocery tax in half, as one “based on consumption” that “puts the control of the tax in the hands of the consumer.” Gunn told SuperTalk Mississippi Tuesday that the average Mississippian would take home an additional $1,300 a year if the income tax was eliminated and that one would have to spend $51,000 on items subject to the sales tax to “eat up” that money.

The income tax generates approximately $1.9 billion a year—around one-third of the state’s annual budget. Following the introduction of the bill, Lt. Governor Hosemann voiced his concern regarding the state’s ability to replace that revenue.

“I’d like to eliminate all taxes, but we have to pay teachers, it costs $2 billion to educate our children and we’re not paying enough of it. We have roads and bridges that are out. I’ve got a healthcare system that needs to be more effective and available to people,” Hosemann said back in late January.

During his remarks Monday and in a Facebook post this morning, Governor Reeves emphasized his belief that the elimination of the income tax would attract businesses and residents to Mississippi.

“We can no longer kick the can down the road when it comes to getting rid of the income tax. We are competing with Texas, Tennessee, and Florida for investment capital and job creation. We are also competing with them for human capital. And they all three have a leg up in that competition – no state income tax,” he said.

The 2020 census revealed that Mississippi was one of only three states in the country to lose population over the past decade.

During the meetings, the 16-member committee—consisting of 8 House members and 8 Senators—will hear from experts and economists as they formulate the potential legislation ahead of the next session.

Watch today’s hearing below:

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