Few items are more popular or numerous in the legislature than income or sales tax exemptions.
This year is no different. Numerous bills, introduced by both Democrats and Republicans, have been offered to exempt the sales tax on the retail sales of school supplies sometime between the last week of July and the first week of August. This will go along with the current sales tax holiday for clothing and footwear purchased in the last week of July.
There have been proposals for tax credits for child care expenses, for companies that hire ex-offenders, for grocers who purchase locally grown food or open supermarkets in “food deserts,” for certain hotel renovations, for businesses to open in certain corridors, for people who purchase certain homes in certain areas, for being a volunteer firefighter, for alternative fuel infrastructure, for being a “small town teacher,” for storm shelters, for ports and airport facilities, for locating a headquarters to this state, and the list goes on and on.
Notably, the House has already passed what is known as the “Mississippi Education Talent Recruitment Act,” the legislature’s response to “brain drain.” If enacted, recent graduates will be able to receive up to the full amount of their individual state income tax liability after they work in the state for five years.
At Mississippi Center for Public Policy, we want taxes to be as low as possible. But rather than limiting the Mississippi Education Talent Recruitment Act to someone who has graduated in the past two years, it should be available to everyone in the state and maybe we call it the “Mirror the Tennessee Income Tax Rate Act.”
Tennessee, of course, doesn’t charge an income tax. And they certainly don’t require you to own property, or complete additional hurdles, to receive a full credit as this proposal would. If you don’t own property, don’t own your own business, or you aren’t a teacher, you would only be eligible for a 50 percent rebate. Nor do you have to wait five years to receive the rebate in Tennessee. You just never pay income taxes.
It works well for the Volunteer State.
The intention of this tax exemption proposal is noble. The other examples range from good to silly, but the need for all these exemptions tells us one thing: Our current tax policies are not competitive. Therefore, we have to do something about it to attract (insert whatever you think the state should try to attract).
We have taken the approach that the only way to attract people is through individual incentives. Which, unfortunately, requires entrepreneurs to focus on favor-seeking in the legislature rather than on improving products and services and growing their business through market-based competition. Playing the game in such a manner gives the state more power and the ability to play favorites, essentially picking winners and losers, thus giving the consumers less power.
By following the lead of high-growth, low-tax states in the Southeast that have lower taxes, lighter licensure and regulatory burdens, and a smaller government, we will be able to offer opportunities for people regardless of their age or their industry.