Tax cuts and reforms can be implemented from several angles. In Mississippi, the most transformative place to start would be by repealing a current tax that taxes people’s livelihoods, commonly known as the income tax. The Mississippi House Representatives and the Senate have presented separate tax cut plans, but not all tax plans are created equal.

Determining the extent of the income tax repeal has been influenced by many factors. However, among the most significant of these factors is determining a balance. The state needs a balance that gives Mississippians impactful tax reform while maintaining a fiscally responsible budget. Without keeping this balance, the tax reform proposal will either focus on the state budget so much that it does not give meaningful tax cuts. Or the tax cuts will go so far that government budgets are jeopardized. This is the paradigm that the House and Senate tax plans should be reviewed through.

Comparing the benefits of each plan for individual Mississippians

In the first place, it is essential to consider how large a tax cut would need to be in order for it even to make a difference in the lives of Mississippians. To quantify the impact that each tax reform package could have, it can be helpful to compare tax cuts against what the private sector defines as a meaningful pay raise.

According to the Conference Board, a world-respected analytics organization that tracks pay raise trends, median salary increases sit at approximately 3.5 percent. In other words, income increases substantially below this amount are below what the private sector might consider to be a meaningful increase in income.

Under the House plan, a Mississippian making a gross income of $40,000 a year would get an approximate $1,500 reduction in taxes through eliminating the income tax, according to a summary published by the House of Representatives. This translates to an approximate net income increase of 3.8 percent. Thus, such an increase would be something Mississippians could genuinely benefit from, just as they might benefit from a similar pay raise at work.

This is contrasted with the Senate plan. Under the Senate plan, a Mississippian making a gross income of $40,000 a year would get an approximate $260 reduction in taxes. This would be a mere 0.65 percent net income increase, which is hardly something that would bring substantial tax relief. In addition, although the Senate plan removes the 4 percent bracket from the income tax, there is no path in the plan that aims towards the total elimination of the state income tax.

 A broad tax cut cannot be called transformative for Mississippi incomes if it is not even the equivalent of a basic pay raise. Thus, when comparing the two plans, the Senate plan is less effective than the House plan when the two plans are measured in light of their positive impact on everyday Mississippians. Tax cuts would be good for Mississippians, even in small amounts. However, a tax reform proposal that does not accomplish its stated goal to give a meaningful reduction in taxes should be revised at a very minimum.

The impact of the tax plans on the state budget and economy

Granted, increases in taxpayers’ take-home income may greatly benefit Mississippi on an individual level, but some would look back to the consideration of the two plans from the state budget angle. In determining how much taxes to cut, a key consideration has been whether such tax cuts would have a negative effect on the state’s budget and fiscal responsibility.   

Mississippi’s state budget is in some of the best shape it has ever been in. Some of the funds are due to an influx of federal funds, but the state also has among the highest state tax revenue collections it has ever had. Thus, while some may argue that it is not a good time for a widespread tax cut and removal of the income tax, it is unlikely that a better time will come about in the foreseeable future.

Instead of the state government simply spending the money itself, money is in the best position when it is in the hands of the private sector. According to the Mercatus Center, several studies have suggested that while private sector investment grows the economy, government spending can actually harm the economy in some cases, by pushing out the private sector in favor of government programs.

Additionally, in light of the excess revenues, it is fiscally responsible to put the money back into the hands of the people. In the wake of the economic struggles of the pandemic, along with the challenges of inflation and Bidenomics, the time has come for Mississippians to at least get meaningful tax relief from their own state.

After all, if an elected government has a balanced budget and an excess surplus, what better course of action than to return the money to the taxpayers it came from? The House plan does the best job at accomplishing this.

It's time for real tax relief in Mississippi

Mississippi needs real tax relief. While both the Senate and House plans give commendable tax cut proposals for the state's people, the House plan carries the most promise as a catalyst for true tax relief and long-term growth. Rather than merely giving Mississippians tax breaks that are well-intentioned but non-transformative, the time has come for state leaders to give the people meaningful tax relief.

The average person would agree that incentives affect behavior, though governments seem to never take a hint when it comes to things like stimulus checks and extended unemployment benefits – People will quit working when you give them money to stay home.

A new report by the Foundation for Government Accountability covers Mississippi’s “economic comeback” following the ending of its expanded unemployment benefits.

“In early 2021, Mississippi was facing the worst labor shortage in state history. By May, Mississippi businesses had more than 84,000 open jobs across the state – a record high at the time. In fact, there were more open jobs than people looking for work. Meanwhile, nearly 80,000 Mississippians were still collecting unemployment benefits – more than 10 times as many as were on the program before the pandemic hit.”

Just as any “free money” would, the federal unemployment bonuses incentivized people to stay home, rather than to return to work. Individuals were collecting more in taxpayer-funded benefits than the average Mississippian earned in wages at a full-time job. With unemployment benefits paying people to stay home, unemployment hit a high, therefore employers struggled to fill open positions, resulting in the labor shortage high. Taxpayers were paying, roughly, a terrible $38 million in benefits each week.

On May 10, 2021, Governor Reeves announced that the state was ending the federal unemployment expansions. Following the announcement, work search activities immediately spiked, with Mississippi businesses hiring more than 72,000 workers in the month of June alone. This was the largest hiring spree in its history. One week after the expanded benefits expired, the costs of taxpayer-funded benefits plummeted to just $2.8 million.

“As one of the first states to opt-out of the federal bonus and expansions, Mississippi deserves credit for setting the stage for other states to follow suit, and for Congress to eventually end the expansions nationwide.”

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The issues of government administrative costs can often get enormously complicated, but in some cases, the issues can be fairly easy to grasp. For example, despite having a lower population than most other states, and a much smaller education budget, Mississippi’s Superintendent of Education receives among the highest salary of any state superintendent in the country.

Representative Nick Bain has introduced a bill to change that. House Bill 415 is a bill to cap the salary of the State Superintendent of Education to no more than 150% of the Governor’s salary. Senators Dennis DeBar, Angela Burkes Hill, and Chris McDaniel have introduced similar legislation in the upper chamber. The bills would save taxpayers money and direct more funding into the classroom. The Governor’s current salary is set at $122,160. The Superintendent’s salary is $300,000. 

In an interview with the Mississippi Center for Public Policy, Representative Bain noted: “For me it is hard to justify her making that much. We have teachers in the classrooms with our children, who work their fingers to the bone, and they barely get by. It’s time we take a hard look at how she gets paid.” Representative Bain’s bill would lower the salary to a maximum of $183,240. This would place the Superintendent’s salary closer in line with the heads of other agencies in the state and the state education superintendents of other states.

Such actions by the legislature are applaudable. In 2021, MCPP released the “Fat Cat Report,” which outlined the top 50 state and local government salaries in Mississippi and found that many administrators within the education system made amongst the highest salaries in the state.

This coincides with an earlier report released by the State Auditor, which found that administrative costs have seen an overall increase. The report concluded that such funds could have been put back into the classroom, to the tune of hundreds of millions of dollars. It is also important to note that while the costs of education superintendents and other administrators were included in the increased costs, such cost increases do not include actual teachers, which are categorized as an inside-the-classroom cost.

While government agencies and administrators often insist on the need for increased funding, a good place to start might just be by decreasing the salaries of overpaid administrators. There is no defensible case for Mississippi’s State Superintendent of Education to make far more than the superintendents of other states, particularly when the state has consistently had education budget challenges.

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The American Conservative Union, Americans for Prosperity - Mississippi, Americans for Tax Reform, Bigger Pie Forum, Empower Mississippi, The Mississippi Center for Public Policy, The National Federation of Independent Business, National Taxpayers Union, and Taxpayers Protection Alliance have sent a letter to the Mississippi Governor, Lieutenant Governor, Speaker of the House of Representatives, and members of the Senate and House of Representatives in support of the repeal of the state's income tax.

The Mississippi Center for Public Policy believes repealing the state income tax would be both a moral and economic good, leading to higher incomes, competitiveness, and prosperity for all Mississippians!

"Mississippi needs a boost," said President & CEO Douglas Carswell. "This coalition has come together to support abolishing the income tax because it’s so important. I hope every conservative in Mississippi will now help make this much needed tax break happen."

"Mississippi stands at a crossroads. With unprecedented revenue surplus and considerable federal dollars at its disposal, policymakers have a unique opportunity to prove that conservative state-based tax and spending reform can work to improve the lives of its citizens," reads the letter. "The Magnolia State can lead boldly in the elimination of the income tax, creating a more competitive environment that attracts new people and capital, increases productivity and grows the economy, and
yields better, higher paying jobs."

Senior Director of Policy & Communications said, "Mississippi has a chance to fundamentally transform its economy with the elimination of the income tax. We are proud to be a part of this conservative coalition fighting for change and are hopeful that the legislation will move forward. We will continue seeking to advance economic liberty as part of our Freedom Agenda for the state.”

For media inquiries, please reach out to Stone Clanton, [email protected]

Yesterday, the House of Representatives passed HB 531 to repeal the Mississippi income tax.

HB 531, also known as the "Mississippi Tax Freedom Act of 2022," was principally authored by Speaker Philip Gunn, along with Representatives Lamar, White, Steverson, Barnett, Massengill, Bain, Newman, Rushing, Kinkade, Morgan, Pigott, J. Ford, Calvert, Smith, Creekmore IV, Goodin, Tullos, Carpenter, Hood, Oliver, Robinson, and Boyd.

Similar to the 2021 income tax elimination House bill increases the tax exemption available to Mississippians (for single workers, the exemption would go up from $6,000 to $37,700 and for married workers, from $12,000 to $75,400). The remainder of the income tax elimination would occur in subsequent years by allowing a 1.5% rate of growth in spending but applying any revenue collected over that rate to increase the exemption until the tax is completely repealed. The Increases the sales tax rate is still there, though the offset is a full percentage point lower. The new bill also still reduces the grocery sales tax rate in subsequent years.

This year’s bill does have some differences, though, including the omission of the special interest sales tax rate increases. Additionally, this year’s plan supplements counties from the state to allow for a 35% reduction in car tags. Both of these are major improvements to the bill, as well as the reduction in increase in the proposed sales tax rate.

We applaud the efforts to abolish this awful levy, as we believe repealing the state income tax would be both a moral and economic good, leading to higher incomes, competitiveness, and prosperity for all Mississippians!

The Mississippi Center for Public Policy approves of this legislation and will continue to update you as the 2022 Mississippi Legislative Session continues, and you can keep up with measures by watching our Legislative Tracker.

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(Jackson, MS): Yesterday the Mississippi House of Representatives voted to repeal the state income tax with HB 531. The Mississippi Tax Freedom Act of 2022 was principally authored by Speaker Philip Gunn, along with Representatives Lamar, White, Steverson, Barnett, Massengill, Bain, Newman, Rushing, Kinkade, Morgan, Pigott, J. Ford, Calvert, Smith, Creekmore IV, Goodin, Tullos, Carpenter, Hood, Oliver, Robinson, and Boyd.

The Mississippi Center for Public Policy welcomes this early "victory" as a sign of hope and a mark of achievement on the 2022 Freedom Agenda.

Similar to the 2021 income tax elimination House bill:

• Increases the tax exemption available to Mississippians. For single workers, the exemption would go up from $6,000 to $37,700 and for married workers, from $12,000 to $75,400.; The remainder of the income tax elimination would occur in subsequent years by allowing a 1.5% rate of growth in spending but applying any revenue collected over that rate to increase the exemption until the tax is completely repealed.
• Increases the sales tax rate.
• Reduces the grocery sales tax rate in subsequent years.

This year's bill does have some differences, though, including the omission of the special interest sales tax rate increases. Additionally, this year's plan supplements counties from the state to allow for a 35% reduction in car tags.

“Three cheers to the House of Representatives for voting to abolish the state income tax!” said Douglas Carswell, President & CEO of the Mississippi Center for Public Policy. “Our state needs a boost, and getting rid of the state income tax will give every Mississippi worker a tax break and help our economy to become more competitive. Neither Texas, Tennessee, nor Florida have a state income tax – and they are thriving. Scrapping Mississippi’s state income tax would help lift up our state.”

Senior Director of Policy & Communications Hunter Estes said, “This directly allows hard-working Mississippians to keep more of their own money, which is an idea everyone should be able to get behind. We're hopeful the Senate will pass this major legislation, too.”

The Mississippi Center for Public Policy believes repealing the state income tax would be both a moral and economic good, leading to higher incomes, competitiveness, and prosperity for all Mississippians!

For media inquiries, please reach out to Stone Clanton, [email protected].

It’s common knowledge that Mississippi has a history of struggling with poverty. While leaders across the state have grappled with the poverty rate and debated the best method to address the problem, it is unfortunate to note that many of the proposals have been centered around government as the solution instead of individual growth and success.

At the heart of many of the initiatives against poverty is the idea that poverty is simply caused by a lack of resources. Thus, the theory goes that to fight against poverty, all the government must do is provide resources, and poverty will be eroded. While such a proposal may seem simple enough at first glance, such a view of poverty has led to many government programs ultimately failing and a cycle of dependence being created within many communities.   

Such a purely materialistic view of poverty fails to account for other factors that contribute to poverty. Such factors can include family instability, addiction, education, criminal activity, the economic environment, and other factors. People in poverty are not mere machines that just need some more financial fuel. They are human beings with unique challenges and struggles.

It is the failure of government to recognize this that has caused so many government programs to be doomed for failure from the start. People are not mere statistics and math equations that can be plugged into bureaucratic central planning and be made to go with the program. No matter how well-organized and well-intentioned a government program might be, government office buildings and procedures have very little ability to work with citizens on the truly individual level.

On the contrary, individuals have the ability to look at their unique circumstances and find solutions and opportunities. For this reason, it is ultimately individual choices and personal responsibility that are the most effective means for people to come out of poverty. Yet, due to an ever-expanding government, many within the Magnolia State have been pushed away from the choices that can lift them out of poverty. This has been primarily done through the two-pronged nanny-state policies of handouts and regulations.

On the one hand, the welfare system often encourages people not to work. A study by the Cato Institute found that in some cases, government programs are paying recipients close or even more than what they could expect to earn through employment. In Mississippi, the state has the 7th highest per-capita welfare expenditures in the country.

In addition to encouragement not to work through certain welfare policies, the state’s current regulatory environment provides a direct discouragement from working in many cases. A study by the Institute for Justice found that Mississippi ranked as the 6^th most heavily burdened state for occupational licensing on low-income jobs -jobs that could otherwise help lift people out of poverty. The study also found that the average occupational license requires more than five months of education and training. History has exposed the failure of a perspective on poverty that simply views low-income citizens as statistical puzzle pieces that need adjustment through bureaucratic central planning and government handouts. Mississippi leaders should shift the perspective of poverty from an angle that focuses on government, to an angle that focuses on the people and attacks poverty by clearing the boundaries to individual responsibility and dignified labor.

One of the most challenging aspects of taxes is finding the balance between limiting taxation to ensure it does not choke out economic innovation and growth while taxing enough to keep the government functioning well. Despite having less expenses, many rural county governments in the state have higher property taxes than urban counties.

It is a balance many governments fail to meet, which is why many tax policies are often miswritten. Property taxes comprise most of Mississippi’s revenue in each of its 82 counties.  In fact, over a quarter of the Mississippi government’s revenue comes from property taxes.  This source of revenue is used for a variety of different purposes; however, a third of municipal governments and public schools’ budgets rely on property tax collections. 

Mississippi exercises a system of five classifications of taxable items when pursuing property taxes.  There is a different assessment ratio in each of these classifications, ranging from 10 to 30 percent of the total value: Class I consists of single-family, owner-occupied residential property, and its assessment ratio is 10 percent. Class II consists of any property that is not Class I property nor property used for public service assessed by the state or county and is assessed at 15 percent. Class III property entails personal property except for motor vehicles and public service property assessed by the state or county.  It is assessed at 15 percent. Class IV property is any public service property assessed by the state or county except railroad and airline property, and it is assessed at 30 percent. Finally, Class V consists of motor vehicle property, and it is assessed at 30 percent.

Despite the specific parameters for the state-mandated rates, there is a large degree of arbitrary inconsistencies on the county-level, which is where the actual taxes are levied. In order to get a grasp on these specifics, MCPP conducted an analysis of average property tax rates per county divided by the per capita income, population, and average property values.

The analysis revealed that many of the poorest counties with the lowest property values have the highest per capita property tax burdens. In addition, many of the counties with the lowest incomes and the lowest populations have even higher taxes than urban counties with higher property values, larger populations, and more government services to pay for.

This reveals that many counties are placing their citizens at a higher risk of tax forfeiture while also driving down incomes. Not only does this affect individuals simply seeking to keep their property, but it is also a distinctive for investment and growth. If property taxes are high, this can also lead many to sell their property and live elsewhere. At the end of the day, county governments ought to tax their people fairly. Local tax rates that arbitrarily tax the property that their people already own without due consideration of actual population and actual government budgets should drastically reformed. If county governments truly want to treat their citizens fairly and encourage growth, property tax overhauls could be a crucial step.