Leaders in the Mississippi House of Representatives ended the session’s opening week by filing a comprehensive tax reform package, one that would eliminate the state’s income tax in just over a decade’s time and slash tax on groceries by over a quarter in the first full year of implementation.
Purposely filed as House Bill 1, with Speaker Jason White calling it his number one priority, the “Build Up Mississippi Act” would net an estimated $1 billion tax cut for Mississippians if approved by both chambers and signed into law. As the 90-page bill is written, it would serve as the state’s largest-ever tax cut by double after the legislature approved a major reduction in income tax in 2022.
The Build Up Mississippi Act, filed Friday alongside over 450 other pieces of legislation in the House, would gradually phase out the income tax with the top rate dropping to 3% in 2027, and by 2037, there would be no “tax on work,” as many state lawmakers have referred to the levy. This would join Mississippi with nearby states such as Texas, Tennessee, and Florida as those who have ditched income tax.
Additionally, the 7% fee levied on groceries purchased in Mississippi would be reduced to 4.5% in 2026 before landing at 2.5% in 2036. Tax on groceries, which are not currently separate from the state’s 7% sales tax on retail items, is the highest in the U.S. as only 13 states tax groceries.
To account for funds currently being accrued through taxes by local governments, an automatic 1.5% bump would be placed on the standard sales tax. That means the tax on groceries would technically be dropped to 4% when the phase-out is complete while the sales tax on non-grocery items would immediately jump to 8.5%. Local boards of aldermen and city councils would have the option to forego the increase, but voting to do so would result in the loss of benefits funded by the additional 1.5%.
For context, an 8.5% sales tax would still be lower than neighboring states such as Alabama (9.29%), Arkansas (9.45%), Louisiana (9.56%), and Tennessee (9.55%).
Reduction of income tax under HB 1
| 2024 | 4.7% |
| 2025 | 4.4% |
| 2026 | 4% |
| 2027 | 3% |
| 2028 | 2.7% |
| 2029 | 2.4% |
| 2030 | 2.1% |
| 2031 | 1.8% |
| 2032 | 1.5% |
| 2033 | 1.2% |
| 2034 | 0.9% |
| 2035 | 0.6% |
| 2036 | 0.3% |
| 2037 | 0.0% |
Reduction of grocery tax under HB 1
| July 1, 2026 – June 30, 2027 | 4.5% (6% with no opt-out) |
| July 1, 2027 – June 30, 2028 | 4.3% (5.8% with no opt-out) |
| July 1, 2028 – June 30, 2029 | 4.1% (5.6% with no opt-out) |
| July 1, 2029 – June 30, 2030 | 3.9% (5.4% with no opt-out) |
| July 1, 2030 – June 30, 2031 | 3.7% (5.2% with no opt-out) |
| July 1, 2031 – June 30, 2032 | 3.5% (5% with no opt-out) |
| July 1, 2032 – June 30, 2033 | 3.3% (4.8% with no opt-out) |
| July 1, 2033 – June 30, 2034 | 3.1% (4.6% with no opt-out) |
| July 1, 2034 – June 30, 2035 | 2.9% (4.4% with no opt-out) |
| July 1, 2035 – June 30, 2025 | 2.7% (4.2% with no opt-out) |
| Beginning July 1, 2036, and onward | 2.5% (4% with no opt-out) |
The wide-net legislation is also cast to address the financial stability of the public employees’ retirement system, something lawmakers and experts have continuously asserted is a $25 billion issue. Beginning in 2026, annual proceeds of $100 million from the state’s lottery would be shifted from the Mississippi Department of Transportation to PERS until the system’s long-term liabilities are funded at 80%. The remainder of lottery funds would be split between early education along with port and railway infrastructure.
To compensate the Mississippi Department of Transportation for losing its stream of funds for roadway construction and improvements from the lottery, the legislation would alter the tax code to implement a 5% sales tax at the fueling pump. Currently, 18.4 cents per gallon is collected as an excise tax on every gallon of gas sold, but there is no tax for the consumer at the time of sale.
The Build Up Mississippi Act was authored by Speaker White, House Ways and Means Committee Chairman Trey Lamar, and Reps. Jody Steverson and Scott Bounds. The Republican-led legislation has been referred to Lamar’s committee and is expected to be brought to the floor for a full vote in the coming weeks.
Both White and Lamar have already touted the legislation on social media, with the latter saying Republican Gov. Tate Reeves played a hand in shaping the package. Any tax reform bill would need to go through his office to be enacted into law.
— Jason White (@JasonWhiteMS) January 10, 2025
House Bill 1, the Build Up Mississippi Act, is one of the most transformational pieces of legislation that Mississippi has ever seen. It rewards the dignity of our people’s work by eliminating the income tax, it makes it easier to feed our families by slashing the grocery tax… pic.twitter.com/1HH6GDzUZo
— Trey Lamar (@tlamar44) January 10, 2025
After both chambers of the legislature adjourned a day early at the end of the session’s opening week due to winter weather, lawmakers will return on Monday to begin what is expected to be an action-packed stretch.
