It’s come into focus as a priority of the state’s top elected officials, and with the introduction of the Mississippi Tax Freedom Act by Speaker Philip Gunn, the first steps have been taken toward the elimination of the income tax in Mississippi.
Over a 10-year phase-out period, the speaker explained that the bill aims to put nearly $2 billion back into the pockets of Mississippians. Upon passage, Mississippians making $50,000 or less—around 57% of state residents—would immediately be exempt from paying income tax and the remainder of the tax brackets would be gradually phased out.
Additionally, the grocery tax, which currently sits at 7%, will be cut down to 4.5% over the first year. It would be gradually decreased to 3.5% by 2026.
With income tax accounting for nearly 1/3 of the annual budget, those funds must be made up. This morning, Gunn explained the strategy for keeping the budget stable while eliminating the tax. The most notable change would be a raise to the state’s sales tax from 7% to 9.5%, which Gunn outlined as a “fairer” policy by sharing the burden among more Mississippians.
“Everybody participates in it, everybody who buys is sharing the burden among Mississippians. Another thing is, you’re picking up out-of-staters who do not pay income tax. A lot of people come to the state on vacation or just paling through and they purchase times here, so you’re increasing your tax pool,” he said.
Additional products such as alcohol, tobacco, vehicles, and more will face additional taxes to help make up for the lost revenue.
“This policy is based on consumption. That puts the control of the tax in the hands of the consumer. Consumers will now have control of how they spend their dollars, which we strongly believe they know how to spend their money a whole lot better than the government. We’re putting the money back in the hands of the consumer they then control what tax they want to pay, and if they don’t want to pay the sales tax on an item, they don’t have to buy the item,” Gunn continued.
Speaker Gunn also mentioned that the $1,000 teacher pay raise is included in this bill while stating that teachers would benefit from the instant relief from income tax, providing an additional $2,000 in extra income.
Should the bill pass the House this afternoon, it will head over to the Senate. Earlier in the session, Lt. Governor Delbert Hosemann expressed support for the elimination of the income tax but had reservations about the ability to replace its 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.
Gunn said the two have had general conversations regarding the move to eliminate the income tax but details have not been discussed.
The House gavels in at 2:00 this afternoon.
Check out Gunn’s full comments below: