Mississippi lawmakers pass state’s largest income tax cut

Mississippi, one of the poorest states in the nation, is on track for its biggest ever tax cut

JACKSON, Mississippi — Mississippi, one of the poorest states in the nation with perpetually underfunded schools and struggling rural hospitals, saw its biggest ever tax cut passed by lawmakers on Sunday.

The Republican-controlled State House and Senate voted overwhelmingly to pass a bill that would reduce state income tax over four years, beginning in 2023. The bill returns to Republican Governor Tate Reeves. He indicated that he would sign it into law.

“This affects every Mississippian who gets up and goes to work,” Senate Finance Committee Chairman Josh Harkins, a Republican from Flowood, said Sunday.

Proponents say a major tax cut could spur economic growth and attract new residents to Mississippi, which was one of three states to lose population in the decade before the 2020 census.

“This tax cut will make Mississippi one of the most work-friendly states in the country,” Republican House Speaker Philip Gunn said.

Opponents say the income tax cut would mean less money for schools, health care, roads and other services, which particularly hurt poor and working-class Mississippi residents.

“I don’t want us all to be hanged in effigy,” Jordan said.

Mississippi’s income tax accounts for 34% of state revenue. Wealthy people would see the biggest financial boost from the elimination of income tax, because they are the ones paying the most now. Poorer residents would see no benefit because they already earn too little to pay state income tax.

As of next year, the 4% tax bracket would be eliminated. The following three years, the 5% portion would be reduced to 4%.

After the first year, the tax-free income levels would be $18,300 for a single person and $36,600 for a married couple, lawmakers said.

Harkins 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. The part of the budget financed by the State amounts to almost 7 billion dollars.

Mississippi has enjoyed strong tax collections in recent months, in part due to increased federal spending during the COVID-19 pandemic. But the state also faces costly budget items, including a lengthy court case that requires improvements to the mental health system. Lawmakers have rarely put all the money needed into a school funding formula that has been in effect since the late 1990s. The state’s corrections system has been under federal investigation after riots in late 2019 and early 2020 drew attention to poor living conditions in prisons.

According to the National Conference of State Legislatures, nine states have no income tax and one, New Hampshire, only taxes interest and dividends. Opponents of Mississippi’s income tax cut point to Republican-led Kansas, which enacted major tax cuts in 2012 and 2013 but repealed many in 2017 after budget shortfalls important and persistent.

Under current laws, a single person with no dependents in Mississippi currently pays no tax on the first $12,300 of income. Due to tax reductions approved years ago, the non-taxable amount will increase to $13,300 after this year. The state has a 4% tax on the next $5,000 of income and a 5% tax on all income above that.

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Follow Emily Wagster Pettus on Twitter: http://twitter.com/EWagsterPettus.

Julio V. Miller