In this series, we are conducting a review of the incredible record Mississippi lawmakers have compiled over the past 10 years. The list provided here is not comprehensive, and we feature only the policies we like: some of which were initiated by MCPP (marked by an *asterisk* below).
So far, we have covered:
10 Years of Regulatory Reform Achievements
10 Years of Social Welfare Achievements
10 Years of Religious Liberty Achievements
10 Years of Second Amendment Achievements
10 Years of Pro-life Achievements
10 Years of Healthcare Achievements
10 Years of Education Achievements
In this final part of the series, I will be reviewing the budgetary and tax achievements advanced by the Mississippi Legislature.
Budget
Several highlights are worth mentioning as we consider Mississippi’s budgeting efforts over the past 10 years. To begin with, the state held down bond debt: perhaps mostly thanks to Governor Tate Reeves, who as Lt. governor was a fiscal hawk. The state also did a reasonably good job in maintaining its Rainy Day Fund. Most notable was Mississippi’s emergence as a leader in performance-based budgeting. This type of budgeting tries to measure the relation between the amount spent and the results: in other words, the bang for the buck.
The proper implementation of performance-based budgeting requires a cultural shift and not just the tweaking or cutting of agency budgets. Implementation is very important, and results can be elusive. This was suggested even as far back as 2003 in a report by then-auditor Phil Bryant.
In 2014, the Legislature made a substantive attempt at instituting performance-based budgeting with HB 677, sponsored by Rep. Becky Currie. That law empowered the Legislative Budget Office (LBO) to require select agencies to inventory agency programs and activities. As I commented in 2014 about this law: “Performance-based budgeting promises to make agencies more accountable and efficient by introducing objective standards that measure successful outcomes, rather than just inputs. The evidence for performance-based budgeting is somewhat mixed, but more budget transparency is a good start. The next step would be to review agency fine/fee collections, with any eye toward lowering and eliminating these hidden taxes.”
This next step, in fact, was accomplished in 2015 and 2016 with a legislative package known as “Financial Ready.” These reforms, passed as part of an expansion of performance-based budgeting efforts, required an identification of all sources of revenue for each agency, including fine/fee revenue and federal funding.*
Also, in 2015, thanks to the leadership of Senator Joey Fillingane and Rep. Greg Snowden, Mississippi became a founding member of the Compact for a Balanced Budget (SB 2389). This Article V effort to amend the U.S. Constitution features a pre-ratified amendment to force the federal government to operate with a balanced budget. The compact was reaffirmed in 2021 with the passage of HB 1326, again thanks to the leadership of Senator Fillingane.*
Finally, we will add that MCPP was a leader in encouraging and facilitating transparency for state spending. Thanks to our website, seethespending.org, taxpayers were able to access millions of government financial records so as to better hold state and local officials accountable. (One reporter called the effort “a near-miraculous step forward in state and county government transparency.”) See The Spending was happily made obsolete once the state decided to post spending records online at transparency.mississippi.gov. (We’re still waiting for them to catch up to the level of detail featured at See The Spending, though.)
Taxes
In 2012, the Legislature significantly expanded the inventory tax credit with a bill (SB 2934) sponsored by Senator Joey Fillingane. Mississippi is one of only nine states that impose this tax, which is assessed regardless of whether a business earns a profit. Total repeal of the tax is made problematic because it is actually a property (ad valorem) tax levied by localities on business inventories.
In 2015, thanks largely to the efforts of Speaker Philip Gunn, the Legislature came close to eliminating the state’s personal income tax. The measure (HB 1629) would have delivered a $1.5 billion tax cut for Mississippians. It died after being amended by the Senate.
The next year, however, the Senate essentially got its way with the passage of the
Taxpayer Pay Raise Act. Sponsored by Senator Joey Fillingane, the law enacted the largest tax cut in Mississippi history. The measure (SB 2858) reduced taxes by more than $400 million over 12 years, beginning in 2017. The law cut the personal income tax and taxes on self-employment. It also phased out the franchise tax, a burdensome tax on investment that few states impose anymore.*
In 2021, Speaker Gunn again introduced legislation to essentially eliminate the state income tax. The Mississippi Tax Freedom Act of 2021 (HB 1439) would have eventually eliminated the individual income tax and reduced the grocery sales tax in exchange for raising various sales taxes. After passing the House, the measure was not taken up by the Senate.
It seems likely Mississippians will see another tax cut before statewide general elections in 2023. Whether this entails an elimination of the personal income tax remains to be seen.
That said, Mississippi’s overall tax burden has risen over the past 10 years, as compared to other states. In FY2011, Mississippi’s state and local tax burden was 8.4 percent, 40th lowestin the nation. For calendar year 2019 (latest data available), it was 9.5 percent, 33rd highest in the nation. In terms of overall taxes paid, as a percentage of national income, Mississippi is falling behind other states. With states like North Carolina and Arizona slashing taxes and attracting new residents and investment, Mississippi is going to have to significantly cut taxes again in order to remain competitive.