Last Tuesday, the Mississippi Senate proposed a $446.6 million tax relief package.
The Senate’s plan would:
- Reduce grocery tax from 7% to 5%
- Eliminate the state’s fees on car tags going to the general fund
- Offer a 2022 rebate of up to $1,000 for citizens with tax liability
- Eliminate the 4% tax bracket over the next four years
The move comes a little less than a month after the House of Representatives passed its own tax reformation plan, entitled the Mississippi Tax Freedom Act of 2022.
The House’s plan would:
- Reduce grocery tax from 7% to 5.5%
- Reduce the price of car tags by 50%
- Eliminate the state income tax
- Raise sales tax from 7% to 8.5%
The 0.5% difference in grocery tax is something that can be worked out, but with glaring differences in terms of income and sales taxes, both chambers are already at odds.
House Ways and Means Chairman Trey Lamar, R-Senatobia, said the Senate plan “pales in comparison to the transformative tax reform that Mississippi needs.”
“I hereby plead with my Senate colleagues to not stop with their initial step [on Tuesday], but to work with Governor Reeves, Speaker Gunn, and House leadership throughout the remainder of this legislative session to fully eliminate the tax on work for our people,” he said.
Senate Finance Chairman Josh Harkins, R-Flowood, is worried about creating a hole in the budget, comparing total elimination of income tax to a lost ship.
“We don’t send the ship off into the ocean and never see it to return,” Harkins said. “What other state has done that? The last state to eliminate your income tax was Alaska in 1974.
“Our plan doesn’t have any triggers. It doesn’t have any tax increases…We’ve heard the governor talk about not wanting ‘to rob Peter to pay Paul,’ and what we’ve done is we’ve presented an idea, a plan that doesn’t do that.”
Currently eight states do not levy state income taxes, while New Hampshire does not tax earned wages.
Governor Tate Reeves has been a longtime proponent of the elimination of income tax without raising taxes in other areas. However, he has voiced encouragement with the House’s plan.
Following Harkins’ take on HB 531, Lamar told SuperTalk Mississippi that their plan is not destined to break the bank.
“We’re not idiots,” Lamar said. “We didn’t roll out this bill that’s going to break the state. In the bill that the House passed, we have allowed at least $300 million to grow state government, to pay our teachers, to pay our state employees, all of those sorts of things that we have to do.”
Also according to Lamar, serious negotiation is unlikely as the two plans are so far apart.
“There is a chasm between the House plan and the Senate plan,” he said. “They say ‘tax cut, tax cut, tax cut.’ That is a code for ‘we don’t want to eliminate the income tax.’ That’s code for ‘we don’t want transformational change in this state.’”
While the House bill passed with an overwhelming vote, the Senate’s plan will go before the Finance Committee in the coming weeks.