Mississippi government to push for total elimination of income tax

Mississippi Governor Tate Reeves has vowed to push for a complete elimination of state income tax in the 2023 legislative session. The move would make Mississippi the 10th state with no income tax.

Addressing a crowd of business leaders Thursday at an event hosted by the state Chamber of Commerce, Reeves touted “the biggest tax cut in Mississippi history during the session of 2022” and said he wanted to go even further.

“Last session, the fiscal and financial environment was right to do exactly that, but unfortunately the political environment was not,” Reeves said. “This session, I hope that’s not the case.”

Mississippi Republican-controlled legislature passed a law in 2022 this will eliminate the 4% state tax bracket beginning in 2023. Over the next three years, the 5% bracket will be reduced to 4%.

According to the National Conference of State Legislatures, nine states have no income tax and one, New Hampshire, only taxes interest and dividends. Washington State passed a capital gains tax for high earners in 2021 that faces a legal challenge.

Proponents of the Mississippi tax cut in 2022 said it would spur economic growth and attract new residents to Mississippi. Opponents said the income tax cut would mean less money for schools, health care, roads and other services, which would particularly hurt poor and working-class Mississippi residents.

Mississippi income tax is 34% of state revenue. Lawmakers said the tax cut would reduce state revenue by $185 million in the first year. By the last year, the figure would be $525 million.

Republican House Speaker Philip Gunn said the complete elimination of state income tax was “achievable”, although he did not commit to doing so during the session. 2023. Lieutenant Governor Delbert Hosemann, also a Republican, did not voice support for eliminating the income tax altogether. Hosemann presides over the State Senate.

Reeves said tax incentives have been supplanted by labor concerns for companies deciding where to locate. “It’s all about whether I can hire enough people to bring my product to market,” he said.

Mississippi’s population has shrunk over the past decade, even as other Sun Belt states are teeming with new residents. The tax cut proposals are a direct effort to compete with states that do not tax income, including Texas, Florida and Tennessee.

“You don’t have to be a geographer to look at a map and recognize that we have Texas to the west, Florida to the east, and Tennessee to the north,” Reeves said. “These three states have no income tax, and therefore these three states have a competitive advantage when we recruit both business and individual talent.

Democratic state senator Hob Bryan said the idea of ​​people choosing where to live based on tax policy is “laughable on the face of it.”

“Do I need to say it again? It’s laughable on the face of it,” Bryan told The Associated Press on Thursday.

“The legislation passed last year was the most disastrous legislation we’ve passed in my 40 years (in parliament),” Bryan said. “The State of Mississippi desperately needs water, sewers and roads. We cannot give away a third of state revenue and have enough money to provide basic services.

Many business interests have not taken a strong stance on the elimination of income tax in Mississippi. In a 2022 report detailing the concerns of state business leaders, the Mississippi Economic Council wrote that “Mississippi’s tax environment was not highly publicized or ever meaningfully discussed as a priority.”

Bryan said the biggest factor preventing capital from flowing into Mississippi is “hospitals across the state on the verge of closing.”

“People aren’t going to move to a place where there’s no health care,” Bryan said.

The 2023 legislative session begins in January.

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Michael Goldberg is a member of the Associated Press/Report for America Statehouse News Initiative.