Cigarette taxes are one of the easiest taxes to raise. It is a tax on an unsympathetic, and shrinking, demographic.

And voters approve a tax increase in Mississippi, as they do in virtually every poll taken on the issue regardless of the state.

Yet, that doesn’t mean raising cigarette taxes to cover budget shortfalls is good public policy. Quite the opposite, excise taxes on cigarettes are one of the least stable parts of a state budget and will likely only leave lawmakers looking for other solutions in a few years.

As taxes on cigarettes are constantly being raised, we have a great deal of data on this subject. What we experience is an immediate bump in revenue, followed by a falloff in collection in future years. This happened the previous three times cigarette taxes have been raised in Mississippi; 1973, 1985, and 2009.

As you can see, the state noticed an immediate uptick followed by a decrease. Today, the state is collecting the same tax revenue (adjusted for inflation) on cigarettes as it was in 1975. This, despite the fact that taxes have increased by 518 percent during this time period.

A second thing happens when a state adopts the highest cigarette tax rates in their region: people look elsewhere for cigarettes. The proposed $1.50 increase (to $2.18) that some are pursuing would place Mississippi’s tax rate at least 90 percent higher than Arkansas and Louisiana and more than 200 percent above that in Tennessee and Alabama. And as a result, even less revenue is collected.

Cigarette usage has been declining since the 1960s and that trend is not slowing, even if Mississippi is above the national average. If the goal of health advocates is to see that number reach zero, it will happen because of continued education, not taxes.

Cigarette taxes are easy. But the comprehensive tax reform that Mississippi needs is far more complex. The state has one of the highest total tax rates as a percentage of personal income in the Southeast. While Mississippi’s local and state tax revenue rate is 10.57 percent, the four neighboring states range from 7.76 percent to 9.91 percent.

And unfortunately for Mississippi, Americans, and their wealth, are moving to low tax states. So what can we do in Mississippi? We can follow the lead of high-growth, low-tax states in the Southeast that have lower taxes, lighter licensure and regulatory burdens, and a smaller government.

The highest tax rates in the country may be found in California or New York, but Mississippians have among the highest tax burdens in the Southeast, even outpacing national averages.

As a percentage of personal income, Mississippians have a state and local tax revenue rate of 10.57 percent. The national average is 10.08 and the Southeast average is 8.57.

Among neighboring states, Alabama has a rate of 8.23, Arkansas is 9.91, Louisiana is 9.22, and the income-tax free state of Tennessee is 7.76. This means Tennessee runs their government for about 25 percent cheaper than Mississippi. Mississippi is the only state in the Southeast, save for West Virginia, over 10 percent. The Mountaineer state is the highest in the region at 11.23.

Mississippi’s percentage has gone up steadily over the past few years. From 2010-2012, it ranged from 9.84 to 9.88. But this trend has, unfortunately, been going in the wrong direction over the past four decades. In 1977, the national average was 10.82 and Mississippi was at 9.82. The national average has decreased .7 percent, while Mississippi’s average has increased .8 percent.

Why does this matter? Because Americans are fleeing high tax states and moving to low tax states.

Twenty-six states had a tax burden of 8.5 percent or greater. Of those 26, 25 had a net out-migration. Only Maine was able to buck the trend. And not surprisingly, of the 17 states that had net migration gains in 2016, all but one has a tax burden of less than 8.5 percent. All totaled, more than 500,000 individuals moved from the top 25 highest-tax states to the 25 lowest-tax states in 2016.

Those high tax states, Mississippi among them, lost an aggregate income of $33 billion.

So what can we do in Mississippi? We can follow the lead of high-growth, low-tax states in the Southeast that have lower taxes, lighter licensure and regulatory burdens, and a smaller government.

Gov. Phil Bryant received a “B” on a fiscal policy report card on America’s governors for 2018.

The report from the Cato Institute measures the fiscal choices and fiscal policies of every governor in America by examining state budget actions dating back to 2016.

“Governors play a key role in state fiscal policy. They propose budgets, recommend tax changes, and sign or veto tax and spending bills. When the economy is growing, governors can use rising revenues to expand programs, or they can return extra revenues to citizens through tax cuts. When the economy is stagnant, governors can raise taxes to close budget gaps, or they can trim spending,” the report notes.

The report credited Bryant for signing business and individual tax cuts into law in 2016. This includes the phasing out of the $260 million corporate franchise tax. It also cut taxes for self-employed individuals and cut the bottom individual and corporate income tax rates from 3 percent to zero.

The report also noted that the state general fund budget has been flat over the past couple years. Further, state government employment has been trimmed. Only four states have seen greater reductions in per capita spending during this time period than Mississippi.

“This report grades governors on their fiscal policies from a limited-government perspective. Governors receiving an A are those who have cut taxes and spending the most, whereas governors receiving an F have raised taxes and spending the most. The grading mechanism is based on seven variables, including two spending variables, one revenue variable, and four tax-rate variables,” the report adds.

Bryant’s grade was best among our neighbors, topping Gov. Asa Hutchinson (R-AR), who received a C, Gov. Bill Haslam (R-TN), who received a D, and Gov. John Bel Edwards (D-LA), who received an F. The report excluded Alabama Gov. Kay Ivey, a Republican, because of her short time in office.

Reshaping our fiscal policy

While Mississippi may be headed in the right direction, our fiscal freedom has long trailed all of our neighbors. Fiscal policy includes state and local taxation, government consumption, investment, employment, and debt. Essentially, how much are you being taxed and how much of our economic activity is controlled by government? In Mississippi, our overall tax burden is a bit above average nationally. And government employment and consumption are far higher than average.

Why does this matter? Because fiscal policy often dictates domestic migration and economic growth. And people are moving to the freest states, which also happen to have the greatest opportunity, an availability of good jobs, and a reasonable cost-of-living.

Calling for a limited, or smaller, government is not a conservative taking point. It is a principle that encourages freedom and prosperity.

A new analysis of financial reports gives Mississippi a “D” for the state’s fiscal health.

According to the report from Truth In Accounting, Mississippi’s finances were ranked 33rd among the 50 states. Based on money available, each taxpayer would have to pay $11,300 to cover the state’s bill.

A large part of that problem is due to retirement obligations for state workers.

“Mississippi's elected officials have made repeated financial decisions that have left the state with a debt burden of $8.3 billion, according to the analysis. That burden equates to $11,300 for every state taxpayer. Mississippi's financial problems stem mostly from unfunded retirement obligations that have accumulated over many years. Of the $16 billion in retirement benefits promised, the state has not funded $5.8 billion in pension and $784.8 million in retiree health care benefits,” the report notes.

The report shows:

• Mississippi has $5.7 billion available in assets to pay $14 billion worth of bills.
• The outcome is a $8.3 billion shortfall and a $11,300 Taxpayer Burden.
• Despite reporting all of its pension debt, the state continues to hide $596.4 million of its retiree health care debt.
• Mississippi's reported net position is inflated by $1.4 billion, largely because the state defers recognizing losses incurred when the net pension liability increases.

A specific breakdown of assets and bills.

“Mississippi's financial condition is not only alarming but also misleading as government officials have failed to disclose significant amounts of retirement debt on the state’s balance sheet,” the report continues. “Residents and taxpayers have been presented with an unreliable and inaccurate accounting of the state government’s finances.”

The taxpayer burden in Mississippi is down slightly from the past two years when it was $11,800 (2015) and $11,900 (2016). However, just nine years ago the burden was only $4,900 per resident.

Louisiana had the worst taxpayer burden among Mississippi’s neighbors at $15,500 per resident. Alabama was similar to Mississippi at $11,800 while Arkansas had a burden of $3,600 per resident.

Tennessee was in the best position, earning a B from Truth in Accounting, with a $2,500 taxpayer surplus. Nine years ago, Tennessee had a $600 taxpayer burden. But they have been steadily moving in the right direction and have been in the black for the past six years.

New Jersey had the greatest burden at more than $61,000 per resident. Alaska had the strongest surplus, $56,500 per resident.

Americans for Tax Reform today led a coalition of 58 conservative groups and activists, including the Mississippi Center for Public Policy, in support of the Tax Reform 2.0 legislation set to be voted on by the House of Representatives later this week.

This proposal is split into three pieces of legislation: H.R. 6760, the Protecting Family and Small Business Tax Cuts Act, H.R. 6757, the Family Savings Act, and H.R. 6756, the American Innovation Act.

Most importantly, Tax Reform 2.0 strengthens the gains made by the Tax Cuts and Jobs Act last year by making individual and small business tax cuts permanent. This tax reduction could not be made permanent when TCJA passed because of a combination of liberal obstructionism, arcane Senate rules, and an unwillingness to reduce out-of-control federal spending.

The legislation also updates retirement, education, and family savings accounts and promotes innovation and entrepreneurship for small businesses.

The full letter can be found here.

This press release is from the Americans for Tax Reform. 

The city of Pearl has taken a prudent approach to the city’s finances over the past 15 months, choosing to reduce spending rather than raise taxes.

For the next fiscal year, the city’s millage rate remains at 27.5 mills and the millage rate for the Pearl School District remains at 60.40 mills.

In 2017, when the current mayor and board of alderman took office, the city’s budget was around $22 million. Last year, the city trimmed it to $18.9 million.

“I knew the struggles the city was having were daily operations,” Mayor Jake Windham said. “We have good revenues. I had a gut feeling we can run a lean budget so we did our due diligence and took the most stringent route. I felt we could dig deep while still doing the necessary things.”

This year, once again, the city did not raise taxes.

“When you decline financially, it makes everything suffer,” Windham added. “We hold ourselves accountable. Raising taxes aren’t necessarily the answer. I didn’t think we had a lean budget like you have at home. We worked with city employees and department heads to create a culture of fiscal responsibility for the city. And they bought in and we were able to turn everything around. This is the first time in eight years we didn’t borrow to pay bills.”

The savings came through reviewing every dollar that was spent and making smart decisions, like implementing a purchase order system.

But this included making difficult choices.

“You can’t cut enough office supplies when you are short falling $100,000 a month,” Windham said. “We knew we had to send people home. We had 20 leave through attrition and had 15 more layoffs.”

For the next year, the budget will increase in key areas.

“As we build revenues, we concentrate on the fundaments of government, then branch out,” Windham said. “We’ve increased where necessary, including road repairs and the clean up of the community.”

The city will also incur new expenses. They are picking up the two percent increase that city employees will pay into the Public Employment Retirement System and health insurance has gone up 18 percent over the previous year.

The city is also on the hook for $800,000 for its share of the Pearl-Richland Intermodal project that will construct a bridge over the railroad tracks on South Pearson Road.

But Windham says the city is on the right track.

“We are making bond payments we weren’t and we look to come in under budget.”

During the recently concluded special session, lawmakers passed a $1 billion infrastructure bill, created a lottery, and distributed BP settlement money throughout the state.

House Speaker Pro Temp Greg Snowden (R-Meridian) and Sen. Hob Bryan (D-Amory) offered their take on the five-day session at Monday’s Stennis-Capitol Press Luncheon in Jackson.

“I believe this is five of the most productive days I’ve experienced,” Snowden said.

Snowden reviewed the three bills at length, calling House Bill 1, the infrastructure bill, essentially a House bill. It will divert money from new bonds, internet sales tax revenue from the 7 percent online sales tax, a new annual tax ($75 to $150 annually) on hybrid and electric vehicles, and sports betting revenue.

Snowden brought up the fact that two United States Supreme Court rulings paved the way for the internet sales tax and sports betting revenue, arguing it was not something they could have done during the regular session.

“We passed three major pieces of legislation,” Snowden added. “You might disagree with them but you can’t say we didn’t get it done. Everyone knew it had to happen, just didn’t know how. And this was a bicameral success. Both bodies worked together for the good of the state. It will be transformative for one or two generations.”

And Snowden noted the bipartisan support.

“Even the lottery wasn’t partisan,” Snowden said.

Bryan had a slightly less optimistic perspective

“Every bad idea imaginable all squared into one session,” is how Bryan began his time at the podium. “The lottery will always be a bad idea. It is not right for the government to run a numbers racket. It preys on the poor, especially poor who are most susceptible.”

Bryan then raised the point of their being little meaningful discussion or debate on the lottery. Under the lottery bill that passed, a five-member board appointed by the governor will oversee a private corporation to run the lottery. The initial bill removed the lottery board from state public records and open meetings laws. The House added open meetings provisions after passing the Senate, but Bryan still didn’t like the idea of a private entity running the lottery. He went so far as to raise the potential for conflicts of interest between the lottery board and private corporations.

“There was so much going on but never time to focus on this huge entity that will have lots of money outside of government controls,” Bryan said. “Some of us tried to slow things down but we were unable.”

Snowden, who voted against the lottery each time it was before the House, said he opposes the lottery because it doesn’t make “good economic sense.” But he added it was better for a private corporation to be running it than the state.

And he noted, “I think it’s fair to say Mississippians wanted a lottery.”

Bryan also mentioned that the infrastructure funding is essentially diverting money from the general fund to cover the new transportation funds.

“This is not an improvement for our state,” Bryan said. “The notion that we’ve done anything to help road maintenance just ain’t so.” He added that this was a short-term solution, noting loss of revenue from multiple tax cuts and government incentives for private companies are taking money from the general fund.

Snowden defended the health of the economy and the budget.

“The health of the economy is not the same thing as revenue in state coffers,” Snowded added. “You don’t judge the health of the economy by how your general fund is doing. We’ve been responsible fiscally and will continue to be.”

Calling for a more limited government is not just a conservative talking point, it is a principle that encourages freedom and prosperity. And it’s backed up by scientific data.

There are eight states where government controls more than half of the economy. Mississippi is one of them.

According to the Fraser Institute, government spending- federal, state, and local- accounts for 55 percent of the economy in Mississippi (as outlined in Promoting Prosperity in Mississippi). This leaves less than half of the state’s economic resources for the private sector. New Hampshire is the freest state, with just 31 percent of the economy controlled by the government. Live Free or Die indeed.

This ranking gave Mississippi the fifth largest government, behind Alaska, New Mexico, Hawaii, and Kentucky. Looking at our neighbors, government controlled between 47-50 percent of the economies in Alabama, Arkansas, and Louisiana. It is 43 percent in Tennessee.

For those that might blame federal spending, if we look at just state and local spending, Mississippi would actually move up to the fourth highest share of government control. So the federal government isn’t to blame.

Government is growing in Mississippi

Interestingly, it has not always been this way. Throughout the 1990s, government control of the economy in Mississippi ranged from about 40-45 percent.

It sat at around 45 percent at the turn of the century. And has been trending in the wrong direction since that time.

Does this matter?

Mississippi has an outsized government. It is larger than our peers. But do we need it? After all, Mississippi is a poor state and largely rural.

Regardless of the size of the state, it is problematic when resources must be dedicated to political favor seeking and lobbying rather than private sector activities. The shift is from entrepreneurship and toward lobbying. That may benefit an individual or a single company, but it does not benefit the economy.

And we have data to show the correlation between economic freedom, which includes personal choice, voluntary exchange, free enterprise, and property rights, and prosperity.

When looking at the Economic Freedom of North America index and per capita income, we see a direct and clear trend. The freer the state, the greater the income.

Those who live in states with the highest per capita income live in the freest states. The poorest states rely on the government. It is not by accident.

People vote with their feet

Beyond the data and freedom indexes from the likes of Fraser, Cato, or Heritage, can you make the argument that people like the high regulation, union friendly status of states like California or New York? After all, Manhattan and San Francisco (minus the used needles and feces on the streets) are highly desirable places to live. And as a result, their cost-of-living is among the highest in the country.

And while those locations might be desirable, net migration tells a different story. We can throw out the data, the policy wonks, and the studies and we still have this graphic.

We are free to live where we’d like in this country. And people are moving to the states that do well on the various measures of economic freedom. As a result, they are moving out of states that do not.

Do people intentionally look at these reports and determine that is where they are going to live? No, probably not. Rather, they are moving to the states with opportunity, with growth, and where the cost-of-living is reasonable. (Hint: states with less burdensome regulations.)

Here is the net migration between 2016 and 2017 among the five freest and five least free states, according to the Economic Freedom of North America index.

The numbers speak for themselves. If we want to increase prosperity and attract new residents to the state, it starts with enacting policies that encourage and promote the principles of economic freedom.

A new report shows taxpayer funded film incentives continue to perform poorly nationwide.

The report, Calling Cut on Film Incentives, was recently released by the Beacon Center of Tennessee and focuses on the poor investment for taxpayers in the Volunteer State. While there has never been an official ROI calculation from the state of Tennessee, the report looked at three key points:

• 40 percent of the subsidized projects made less at the box office then they received in subsidies
• Several of the subsidized projects only spent a small share of their budget in state
• Many programs hold the state, i.e. taxpayers, hostage and threaten to move if they do not receive additional subsidies, similar to sports teams and corporations

A similar story in Mississippi

Mississippi has a similar experience with film incentives. A 2015 PEER report shows taxpayers receive just 49 cents for every dollar invested in the incentives. For those looking at a bright side, we are actually “doing better” than many other states.

This includes our neighbors in Louisiana, who recover only 14 cents on the dollar. They also have one of the most generous programs in the country; it was unlimited until lawmakers capped it a couple years ago. (Other reports show the Pelican State recovering 23 cents on the dollar, either way a terrible investment.)

Good for production, not the economy

Beyond Mississippi, Tennessee, and Louisiana, film incentives are universally a poor investment throughout the country. Numerous studies have been conducted on film incentives. All sobering for those worried about taxpayers. Here is a review of the return per tax dollar given, from 2008 through 2013. In these third-party studies, covering 12 different states, there was not a program that returned 50 cents on the dollar (never mind actually made money).

Source: John Locke Foundation

Since this chart was published, studies on similar programs in Florida, Virginia, and West Virginia have shown similar results. No program had a positive ROI.

If an individual was investing their own money, they would never make any of these deals. But is has been said, and proven, many times that no one spends their own money more carefully than that person.

A move in the right direction

Mississippi lawmakers have begun to scale back on the “handouts to Hollywood.” Last year, lawmakers chose not to extend the non-resident payroll portion of the incentives program. This previously allowed for a rebate on payroll paid to cast and crew members who are not Mississippi residents.

But we still have two incentives on the books. One is the Mississippi Investment Rebate, which offers a 25 percent rebate on purchases from state vendors and companies. The other is the Resident Payroll Rebate, which offers a 30 percent cash rebate on payroll paid to resident cast and crew members.

And old habits die hard. The House voted to bring back the incentives this past session. The bill didn't make it through the Senate and that incentive is still dead.

Mississippi is moving in the right direction and they are joined by other states. While all but six states had film incentives a decade ago, the number is now up to 19. Mississippi can be number 20 by removing the incentives currently on the books.

Just because other people are doing it

One of the common prescribed reasons for why need film incentives is because it’s “good” for the state to have movies filmed here. As is often the case in government, we focus on the inputs. How many films are made here? What movie star was in Mississippi? That is nice, but the focus should be on outcomes.

The other common argument is that other states are doing it. That is the point the Beacon Center made about producers holding the state hostage and threatening to move. Producers in Mississippi have raised the same point. And I am sure they have in every other state where film incentives are threatened.

However, simply because another state is wasting money does not mean Mississippi should join them.

Corporate welfare is never a good idea. It’s an even worse idea when you know we are losing money and you want to continue with or resurrect such a program. Our goal should be to have the most competitive business climate in the country. The tax breaks that a few chosen industries or companies receive should be made available to all. When we do that we will remove the need for taxpayer funded incentives.