It is clear that the United States is facing a significant crisis in relation to inflation. This problem has existed for a variety of reasons that cannot be boiled down to one or two issues. Instead, this problem has multiple influencing factors and variables. Despite these elements, central planners have continued to make predictions that are often proven wrong.
The factors that have pushed inflation upward will likely linger into 2022, especially if the Omicron variant comes into play. In his recent remarks to Congress, Federal Reserve Chairman Jerome Powell noted that despite its prior predictions of limited inflation, the Federal Reserve no longer viewed the recent inflation growth as “transitory.” Instead, the Fed is now considering raising interest rates to mitigate the increasing growth of inflation as the prospects of its long-term effects continue to expand.
In response to this crisis, various states are seeking political action, trying to mitigate the negative effects of this inflation. While some try to open up the free market, trying to provide some organic solution to the problem through tax cuts, others policymakers try to provide an artificial solution through monetary policy. While the former actively seeks to resolve the issue, the latter denies the true problem at hand.
In November, Mississippi Senator Roger Wicker expressed the nature of the current economy and the problems with President Biden’s efforts to fix it. The reality is that the inflation problem is far worse than experts had predicted. Prices of goods have risen by 6.2 percent, the greatest margin since 1990. Gas prices are being driven through the roof (nearly 50 percent), placing a great burden on Mississippi agriculture, a critical element of the state’s economy. As a whole, Mississippi has suffered from the effects of inflation, and the reality is that this simply could not be reflected in the predictions of experts.
Senator Wicker’s remarks demonstrate the very reason why monetary policy often does not work. Artificial solutions to economic problems often assume that economic phenomena can be accurately predicted and centrally planned. Various government policies like setting tax rates, printing currency, economic regulations, and government spending merely serve as a manipulative tool to change how the economy works, but they are useless if people cannot predict and prescribe what the economy needs in the near future.
Unfortunately, the inflation crisis rose at a rapid pace, making it nearly impossible to predict. Perhaps the better option is to simply let the free market take its course than sweat over what is the best way to approach monetary policy.
Is concerning is that such policies of government involvement, are often lazy in nature, putting more of an emphasis on the government simply “buying out” the economy rather than establishing good monetary policy. The Heritage Foundation examined the nature of the economy within the Covid-19 context. It explained that while appearing to be helpful and compassionate in a crisis, government spending only postpones the inevitable. It appears that the nation is now reaping what it has sown in its zealous attempt to “protect” the United States economy.
Mississippi faces a hard road ahead, and as much as it is tempting to step in and solve for a wavering economy, it is all the more critical to let free market solutions simply take their course. As useful as studies and expert predictions can be, the whole economy cannot rely on them entirely. After all, no one can predict the future – not even the “experts.”
Precious metals like gold and silver have an interesting relationship with state economies and currencies. While the federal government has moved away from precious metals in favor of fiat currency, some state governments have also put policies in place that discourage gold and silver investment. Unfortunately, Mississippi is no exception.
Traditionally, currencies were managed on a fixed basis, meaning that governments print and distribute money based on the amount of gold and silver that is available. However, as time has moved on, these standards have been neglected and governments now operate on a more “flexible” monetary system. This means that the federal government can print money at its discretion. The problem is that the more the government prints, the less valuable American currency becomes, which causes serious economic problems like inflation.
It is no secret that the nation is suffering a crisis of inflation currently. This is due to a variety of reason that can be found elsewhere. However, state responses to this problem have started going in the right direction as governments begin to release controls like taxation on precious metals. The reason why this is a good thing is because, while precious metals are also good used for trade, it is effectually a currency. When states tax the sale of precious metals it is essentially taxing money itself. It simply does not make sense and is akin to going to the grocery store and being charged a tax for breaking out a five-dollar bill. This causes individuals to not engage in the precious metals market and distances the economy even more from a grounded monetary system.
A couple of days ago, the Money Metals Exchange and Sound Money Defense League released an index ranking the states on their precious metal policies. Each state is evaluated based on 12-criteria system that primarily examines whether states levy a sales tax against precious coins and bullion. On this point system, Mississippi ranked one of the lowest (7th worst) overall. This indicates a specific problem that can be remedied within the state by removing government taxation on precious metals.
As it stands, Ohio is the only state that has establish policies allocating a percentage of state-held pension funds to physical gold. Additionally, the majority of states throughout the country have either significantly decreased or removed altogether sales taxes on precious metals altogether. This is a good policy in returning to an economy that is grounded in something fixed. This is achieved by treating things like precious metals as distinct from the rest of the economy.
Mississippi is one of only nine states that imposes sales tax on precious metals, thus, it levies a 7% tax on gold and silver purchases. However, it is currently part of a group of states that are considering lessening or removing the sales tax on gold and silver. In the 2021 legislative session, a bill was introduced that would have repealed the sales tax on gold, silver, platinum and palladium bullion. However, the bill died in committee.
Repealing the sales tax on precious would be a good change for the economy. Prices for precious metals, and the inflation rate that comes along with them, should be able to fluctuate naturally without states artificially interfering. This is the essence of how free market economies are supposed to operate.
Friendly precious metal polices on the state level could lessen the burden for individuals like investors engaging in the market and including physical metals as part of their portfolios. Such reforms could also help citizens seeking to protect their savings and retirement from the erosion of inflation.
As Ron Paul describes it when he testified before the Arizona Senate Committee when it considered gold and silver monetary reform: “It makes no sense to tax money.” Mississippi should follow this commonsense principle and remove taxation on precious metals.
FOR IMMEDIATE RELEASE
(Jackson, MS): The Mississippi Center for Public Policy continues its effort to make the case for the abolishment of the state income tax by addressing the immorality of the levy.
The inherent idea of an income tax suggests that, depending on how hard someone works and how much they earn, they will then be taxed accordingly. This is wrong.
For a government to take from its citizens, not because they have broken any law – but simply because they have worked for their earnings – is to pervert its own function and to misuse for injustice the power that it has been granted to maintain justice. Everyone should be treated equally under the law, including taxation, and contribute the same as every other citizen for the upkeep of the society in which they live.
"It's time to give Mississippi a boost and get our state growing," said Douglas Carswell, President & CEO of the Mississippi Center for Public Policy. "Abolishing the state income tax would give every Mississippi worker a pay raise. It would mean they had more money to spend on their priorities and families."
People are better at spending their own money than the government. Leaving Mississippians to keep more of their money to spend on their preferences will ultimately make Mississippi's economy more efficient.
MCPP hopes to see cooperation between state leaders and offers these recommendations to see a successful implementation of abolishing the Mississippi income tax:
- Keep non-income tax rates the same and appropriate the State's $1 billion surplus revenue to reduce the income tax revenues
- Appropriate 50% of budget surpluses to reduce income tax revenues until it has been entirely eliminated
- Place cap on State's general fund budget increases that prohibit increases above 1.5% annually
The Mississippi Center for Public Policy believes repealing the state's income tax would be both a moral and economic good, leading to higher incomes, competitiveness, and prosperity for all Mississippians.
You can read the FULL REPORT HERE.
For media inquiries, please reach out to Stone Clanton, [email protected].
Robbery occurs when one party uses intimidation, force, or threats of force to steal from another party. Most would agree that stealing is immoral, even if what was stolen was “for the greater good.” The same should be considered when talking of income taxes.
Americans first encountered an income tax in 1861 to pay for Civil War costs, demanding 3% on incomes above $800. It was replaced a year later and again in 1864 with even more progressive rates, but the acts were ultimately allowed to expire and mainly viewed as emergency measures for wartime situations.
Congress then readdressed tax laws, eventually passing the Wilson-Gorman Tariff Act of 1894, making it the first peace-time income tax. A 2% flat tax on incomes over $4,000 was to make up for revenue that would be lost by ongoing tariff reductions.
The Supreme Court ruled the tax unconstitutional on grounds of the 10th Amendment because it was not apportioned correctly amongst each state’s population, as then required with direct taxes. A shift from the individual rights of the Founders to the collective rights of the Progressives was a watershed transition in American thought at the turn of the 20th Century, which made the Court’s decision unpopular.
Proponents of a nationwide annual income tax argued it would force the so-called “robber barons” to pay taxes – It wasn’t supposed to provide a mechanism for Washington to reach into most Americans’ pockets. For example, the highest rate in the proposed legislation, greater than $500,000 (equivalent to $13,854,040 today), was only 7%. The average income for a single individual around the time was only $800 (equivalent to $22,166 today), plus there was an individual $3,000 exemption. So, yes, the initial rates, despite being progressive, appeared not all that burdensome. And it is easy to understand the frustration of the average American with monopolies and other forms of cronyism, but the collecting of taxes based off of one’s income would prove to be dangerous. The Federal Income Tax was finally solidified with the ratification of the 16th Amendment in 1913 (Mississippi was the fifth state to do so in 1910), allowing Congress to levy one without apportioning it upon the states’ populations.
Fast forward to 2021, and the highest rate on the bracket starts at an income of over $523,600 for a single filer, and they’re taxed at 37%, meaning they would have $329,868 left. The average income today, for a single Mississippian is $45,081 (the lowest in the nation) and is taxed at 22%, leaving them $35,163 and not taking into account the state’s income tax, sales taxes, property taxes, and any other levies. This goes to show that if you give the federal government an inch, it will take a mile, and often for the worse.
While there is plenty of room for an argument criticizing the harsh economic and fiscal implications income taxes have, a much simpler one is how immoral they are.
Just the thought of taxing someone based on how hard they work and how much they earn is depraved and selfish in nature. People have a right to the fruits of their labor. Everyone should be treated equally under the law, including taxation, and contribute the same as every other citizen for the upkeep of the society in which they live. The inherent idea that you must give up a determined amount of money to a government based on your income – or face severe consequences – is ludicrous. To quote Dr. Ron Paul: “If you concede the principle of the income tax, you concede the principle that the government owns your wages and permits you to keep a certain percentage of it.” The income tax, for the lack of a better word, is theft. Theft, as we should have learned as children, is wrong.
In taking someone’s income, the government then adds it to its funds for different programs, deeming itself a wiser steward of finances than who they took it from. The government believes that it can put someone’s money to better use than the original owner ever could and shows it is not truly concerned with the individuals’ specific needs, but only the general populace. The government has no interest in you or your loved ones’ prerogatives – Just y’all’s money.
While Mississippi can’t do much to fix its past sin of ratifying the 16th Amendment, what it can do is lessen the burden on workers by repealing its own income tax. It is the least it can do.
The Magnolia State’s income tax is a graduated one, with the first $2,000 of taxable income not taxed at all, the next $3,000 taxed at 3%, the next $5,000 at 4%, and anything over $10,000 is at 5%. This means that a worker earning over $10,000 will therefore be paying $1 in state income taxes out of every $20 they earn over $10,000. According to the Governor’s executive budget recommendations, an individual with a taxable income of $40,000 would be $1,850 better off if the income tax was eliminated. This leaves the individual more of their money and gives them the choice to spend it on their priorities.
The Mississippi Center for Public Policy is making the case for the abolition of the state income tax, and you can read more about it here.
FOR IMMEDIATE RELEASE
(Jackson, MS): The Mississippi Center for Public Policy today released a policy paper reiterating the case for abolishing the state income tax.
"It's time to give Mississippi a boost and get our state growing," said Douglas Carswell, President & CEO of the Mississippi Center for Public Policy. “Abolishing the state income tax would give every Mississippi worker a pay raise. It would mean they had more money to spend on their priorities and families.”
“With Mississippi’s budget in a record $ 1 billion surplus, now is the time to do it” he went on to explain. “Let’s not wait for politicians to figure out new ways to spend that surplus. Let’s use it to allow workers to keep more of their own earnings.”
MCPP's "Axe the Tax” campaign is set to popularize the argument in favor of giving Mississippi a tax break through the abolishment of the state income tax. The report highlights many key points of the argument, including:
- It would give a major tax break for working families. The median household income in Mississippi is $45,081, and under the current structure, such a household would have to pay approximately $1,600 in state income taxes. The Governor’s executive budget recommendations suggests an individual with a taxable income of $40,000 would be $1,850 better off if income tax was eliminated.
- It would make Mississippi more economically competitive. Neither Florida, Tennessee, nor Texas have state income taxes, and all three have prospered. Mississippi, however, has done less well, decreasing in population and growing less rapidly. Repealing the income tax would assist people with higher and lower incomes in a personal tax break and encourage more private consumer spending.
- It would be great for local entrepreneurs. Mississippi has a long history of giving tax cuts to big corporations. An abolition of the income tax would be a break that helps ordinary businesses – not just those that are well connected in Jackson.
While it failed to pass in the 2021 legislative session, it is likely the issue of income tax abolition will be featured prominently in the 2022 session. MCPP hopes to see cooperation between state leaders ahead of this and offers these recommendations to see a successful process:
- Keep non-income tax rates the same and appropriate the State's $1 billion surplus revenue to reduce the income tax revenues
- Appropriate 50% of budget surpluses to reduce income tax revenues until it has been entirely eliminated
- Place cap on State's general fund budget increases that prohibit increases above 1.5% annually
The Mississippi Center for Public Policy believes repealing the Mississippi income tax would be both a moral and economic good, leading to higher incomes, competitiveness, and prosperity for all Mississippians.
You can read the FULL REPORT HERE.
For media inquiries, please reach out to Stone Clanton, [email protected].
If there is anything we must learn from the Great Depression and FDR’s New Deal, it is that throwing policy at a wall to see what “sticks” is never a good idea. This is especially true when those policies involve trillions of dollars.
When FDR put forth his plan to save the nation, the problem in his approach was that policy did not have an indicated, narrowly defined purpose and cost the nation greatly. Coming out of the Covid pandemic, we are facing a similar situation with Biden’s Build Back Better strategy, which would ultimately cost $3.5 trillion despite the president’s insistence that it will cost nothing. Biden believes this because his assumption is that the money will be returned when we “invest in America” in areas such as climate and providing a social safety net for families and small businesses. The irony is that some in his own party do not agree as such a bill will likely add to the already daunting inflation rate.
The reality is that virtually none of the solutions that Biden offers in this strategy is actually free. A study from the University of Pennsylvania confirms this. In fact, the national debt is said to increase by 25 percent over 30 years if Biden’s plan comes into effect.
Mississippi should not follow suit in this approach of governance. As tempting as it is just to throw money or ideas at the wall to try to fix a problem. Good policy must have a specific purpose and not operate on assumptions that “we will just make our money back.” That may be a byproduct, but it is a substantial risk that taxpayers often cannot afford if it falls through. Prudence is key.
This is why the narrative that the government is going to “invest in America” is so dangerous. For one, the government is not an investor as if it has generated its own money. The government only has money because the people have been forced to give it money. The second problem is that “investing in America” is so vague and broad that it boils down to just flowery rhetoric, yet it is treated as some profound justification for large spending. This was FDR’s strategy and it ultimately led to several lawsuits in which the Supreme Court granted relief and put back the nation several years back in recovering from the Great Depression.
Throwing money at a wall to see what sticks might help if you have unlimited resources and no consequences; however, neither President Biden nor the Mississippi government has this luxury. If effective and positive change is to occur, we must depart from this “investing in America” narrative and support the American economy by making government smaller, not bigger.
The Mississippi legislature is currently reviewing a proposal to remove the state income tax. At the same time, the state’s finances are in good shape, with a healthy emergency fund and high revenues. Meanwhile, many Mississippians are struggling from the pandemic economy, feeling the impacts of inflation, and watching the federal government continue to increase taxes and spending.
A common objection to repealing the state income tax is that the state government’s revenue and budget could be damaged. While such an argument might work seemingly well in a federal context with bloated budgets, Mississippi’s government has a fairly responsible budget that is the fruit of conservative spending policies.
To start, a key indicator state’s fiscal health is the status of it rainy day fund. In Mississippi, the state’s rainy day fund has seen exceptional growth over the last several years. In 2013, the state had $86 million in the rainy-day fund. In 2021, the rainy-day fund had $558 million. That is an increase of 640 percent in just eight years. The current funds are enough to run the entire state government for 36 days.
In addition, the state is seeing higher than expected revenue collections, which are an additional indicator of financial stability. In October 2021, the Legislative Budget Office reported a 16.42 percent increase above the general fund estimates for this fiscal year.
This brings in a key question. One of the key purposes of true fiscal responsibility is so that the people will have less burdens from excessive government debt, taxes, and spending. Yet, what use is it for the people if the government follows a responsible budget and keeps the same tax burden on the people? Sure, such policies will certainly fill the state coffers, but they leave the state’s people with less income and less freedom.
Shifting the focus from state government to the actual citizens of Mississippi, it is important to note the present need for financial relief through a smaller tax burden. Thus, while the state of Mississippi has surplus revenues that are continually growing, a recent study from Forbes found that 40 percent of individual Americans with emergency savings prior to March 2020 dipped into those savings during Covid. Seventy-three percent of those individuals used more than half of their emergency fund. Americans are in a time of financial challenge -and having to pay federal and state income taxes isn’t helping them either.
Combined with all of these state-level fiscal factors is the recent financial influence of the federal government on the state budget and individual Mississippians. The state government has received millions of dollars in federal funding to its great financial benefit. Meanwhile, citizens have had to deal with the direct effects of federal spending and inflation on their wallets and shopping carts. The state should address this discrepancy by creating a tax environment with no state income tax that adds to the burdens coming from Washington.
Looking to 2022, the state government will have a large degree of leverage as it can use federal funding for long-term projects that require large amounts of funds, such as roads and bridges. Even if all of the federal funds were only utilized for special, long-term projects and the funds played no role in the routine operations of state government, these federal funds could remove some fiscal pressure from state revenues. This removes even more pressure from the state’s own revenue funding and provides flexibility for the income tax repeal.
In light of these facts, it has become clear that now is the time to repeal the state income tax. A truly conservative government will lower taxes whenever it can responsibly do so, and it is now or never for Mississippi. If state leaders cannot execute a plan to eliminate the state income tax in 2022, a better time may never come. With state government funds in a stable position, and the citizens recovering from financial challenges, it’s time for Mississippi to “Axe the Tax.”
Retirement is one of the critical financial elements in the lives of thousands of Mississippi. With many Mississippians being employed by the state and local governments, the status of the state’s Public Employee Retirement System (PERS) is extremely important.
According to numbers provided by PER, approximately 13 percent of the total workforce members in the state are active members of the PERS system. This equates to approximately 150,000 Mississippians. Additionally, the system has approximately 112,000 retirees. According to the United States Census Bureau, 488,000 Mississippians are over 65 years of age, and about 11 percent of them are PERS retirees. In all, about 1 in 10 Mississippians are either active members or retirees under PERS. Despite the importance that PERS carries for so many Mississippians, it has not done very well.
The structure of the Public Employee Retirement System is based on a system of Defined Benefit Plans. Under this structure, government employees have a defined percentage of their income directed to the PER system (currently 9 percent). The government entity the employee works for also contributes to the fund via a match that is calculated as a percentage of the employee’s income (currently 17.4). In return, PERS invests the funds and guarantees that the employee will receive defined retirement pension benefits, even if the funds do not provide a good return on investment.
From a limited viewpoint, it may appear that PERS is doing relatively well with its investment returns. The fund saw a 32 percent increase in investment value from June 2020 to June 2021. However, it is important to note that the stock market was in a rebound from the historic effects of 2020 Covid. Thus while the fund saw large increases in 2021, annual investment returns in 2020 were only 3 percent. Furthermore, these increases are not enough to fully address the systemic issues that have caused a gap between the fund’s obligations and actual investment returns.
According to PERS 2020 fiscal year report, the fund had assets with a market value of $28.4 billion and total liabilities of $47.4 billion. This means that the investments were only supporting 61 percent of the total retirement liabilities. According to a recent report issued by the American Legislative Exchange Council, the state retirement system is the 15th most underfunded in the nation on a per capita basis. The state also has the highest amount in the country for unfunded liabilities as a percentage of GDP.
Although the policy issues surrounding the system are extremely complex, some fundamental reforms could be made to help address the level of underfunded liabilities. In addition, the state should also consider reforms that will provide government employees with greater retirement flexibility.
In the first place, it is important to consider the issues surrounding the assumed rate of return utilized by PER. In states across the country, an increasing amount of retirees and major market fluctuations such as the 2008 Crisis and the Covid impact in 2020 have shown many of the assumed rates of return to be higher than the actual annual averages. In light of this, some have called for PER administrators to lower the assumed rate of return to better account for the element of investment risk.
This alternative model that directly factors in risk is known as “risk-adjusted discounting.” Indeed, most of the retirement systems in states across the country have been all but forced to lower their assumed rates of return due to volatile market conditions. However, best practices have these changes implemented in the assumed rate of return without being forced to do so by the market.
Furthermore, rather than centralizing all pension investments into one centralized state agency, Mississippi should consider implementing reforms that would allow government employees more freedom with their retirement contributions.
Some states, such as Utah and Michigan, allow their government employees to opt to allocate funds to a 401(k) style Defined Contribution Plan. This gives state employees flexibility on what they would like to invest in for retirement if they choose to opt out of the standard Defined Benefit Plan. While 401(k) type plans do not have the same guaranteed return, employees have the benefits of greater growth potential, more portability, and the ability to have more personal responsibility over their retirement future.
Fiscal responsibility, good government, and sound public policy are important in ensuring that the public retirement system can best serve government employees. By implementing balanced reforms, the state could see a healthier retirement system that can serve its employees for years into the future.
Despite being a fairly conservative state, Mississippi still spends a large amount of its state budget on welfare and entitlement programs. Many of the programs themselves have structural problems on a policy level. Yet, many have also managed to cheat the programs themselves and exacerbate the problems that systemically arise from welfare and entitlement systems.
In order to grasp the importance of accountability and verification with the use of state welfare dollars, it is vital to grasp the scale of welfare and entitlement spending in the state. The state budget allocates much of its budget to welfare and/or entitlement programs such as Medicaid, TANF, Division of Community Services, and others. There are really two main types of fraudulent activity that contribute to the waste of taxpayer dollars in this system.
The first is the more blatant type of fraud in which an individual utilizes the money in these programs without having ever qualified for them in the first place. This is the case with many of the recent high-profile scandals in the state in which millions of dollars were directly stolen from these programs. This is also the case when individuals submit fraudulent documents that allow them to “qualify” for state resources that they would not qualify for legitimately.
The second type of fraud is if an individual initially qualifies for a program and then attempts to hide a change in circumstances, such as an income increase. For most programs, state law requires individuals to notify the government if a change in circumstances has made them ineligible for the program. Such fraud goes against the allegedly temporary basis that these programs are designed for.
Both types of fraud have wasted millions of taxpayer dollars over the years. The systems themselves already have to deal with the challenges of managing the funds, and fraud adds an additional layer of complexity. In order to ensure that taxpayer dollars are not being consumed by fraud, the state should take proactive measures that require more verification and accountability protocols for the use of these funds.
The state already has access to several levels of verification, including driver’s licenses, state income tax returns, unemployment records, and others. Rather than having vague rules that vary from agency to agency and have numerous administrative loopholes, the state should consider inter-agency identity and income verification procedures that fill in the gaps. In some cases, even a basic cross-reference of welfare applications with state income tax returns could provide documented proof.
Instead of having policies that allow fraud to slip through frequently, state leaders should consider leveraging every available tool to verify that state welfare dollars are not lining the pockets of fraudsters. This is a critical step to help cut down on the waste of funds that digs right into taxpayers' pocketbooks.