Several groups from across the country, including the Mississippi Center for Public Policy, have signed a coalition letter making key policy recommendations for broadband spending.
The letter calls on policymakers to ensure that they spend broadband funding in an accountable and responsible way. In the wake of an almost unprecedented amount of federal spending, the coalition calls on policymakers to ensure that they responsibly manage broadband funds by prioritizing areas with the biggest connection gaps.
There have been some calls in Washington to redefine the legal definition of broadband by raising the speed benchmark. The coalition letter urges policymakers not to raise the benchmark when many areas have not even met the prior benchmark yet.
Raising the speed definition for broadband would hurt rural areas as funds would likely be diverted to allow for urban areas to upgrade their speeds to meet the new broadband speed benchmark. This a time that the nation has needed broadband access more than ever before and raising the broadband benchmark would put many rural and suburban communities only further behind as they compete for broadband funds with areas that already have service.
The letter notes:
“With billions of dollars available for broadband and other infrastructure, many densely populated areas with political clout have lobbied for these funds. State lawmakers should ensure broadband funds flow to areas that lack broadband access, as defined as 25 Mbps download and 3 Mbps upload, rather than providing funding for areas that already meet these benchmarks. Expanding access should be lawmakers’ No. 1 priority.”
The letter also makes specific recommendations for policymakers to increase efficiency and lower costs by rejecting government-owned networks, cutting red tape, and pursuing free-market solutions to expanding broadband access. The letter notes again:
“Many of our states have had experiences with costly government owned networks which have done little to expand access or adoption… The money flowing to state coffers is not without limits. States should work to stretch every dollar as far as possible by removing red tape.”
The full text of the letter is available here. It was signed by Tech Policy Specialist, Matthew Nicaud, on behalf of the Mississippi Center for Public Policy and the Mississippi Technology Institute.
Policymakers must treat taxpayer funds with fiscal responsibility and public accountability. The Mississippi Center for Public Policy is proud to support sound policies that uphold the best interests of citizens and pursue real solutions to broadband expansion.
A coalition of groups from around the nation, that include the Mississippi Center for Public Policy, have joined together in common cause against new overreach by DC politicians. The group is signaling their opposition to new policy that could limit states’ ability to cut taxes.
The recent “American Rescue Plan Act” serves more as a slush fund for fiscally mismanaged states and localities than as a serious attempt to help those struggling with recovering from the economic consequences of COVID-19 and government-imposed shutdowns.
The Act includes $350 billion in State and Local Fiscal Recovery Funds. These funds come in addition to the hundreds of billions in federal assistance to state and local units of government through the CARES Act and other legislative actions taken by Congress in 2020.
Furthermore, Congress has decided to spend this massive amount of money although total state and local revenues actually increased in 2020, and many states have even seen their surpluses expand.
However, the Act goes a step further than just recklessly spending taxpayer dollars. The editorial board of the Wall Street Journal noted that the new law bars states from using the influx of new funding to reduce state taxes directly or indirectly through 2024. This language is vague and no clarifications about it have emerged from the Department of Treasury so far.
The ambiguous language has many rightly concerned that any efforts at the state level to reduce the tax burden of its citizens could be stymied by the federal government.
Recognizing this vast federal overreach, a coalition of concerned leaders has signed onto a new letter to signal their opposition to the unprecedented move. The campaign was organized by the American Legislative Exchange Council (ALEC).
The letter notes, in part:
“Using federal coercion to artificially elevate state tax burdens at a time when small businesses and hardworking American taxpayers need real tax relief is nonsensical. Our groups have spent decades working with state policymakers and watching them achieve more economically competitive business climates through pro-growth tax and economic reforms. Having the federal government use “the power of the purse” in an attempt to curtail the use of competitive federalism is incredibly damaging to our American system of government.”
It continues, “[w]e will work to protect the fundamental principle of federalism and allow states to continue their progress in pursuing economic gains as the 'laboratories of democracy.' Restricting states from providing pro-growth net tax relief tips the scales of federalism inexorably toward central planning and micromanagement by the federal government.”
You can read the letter in its entirety here. It was signed by MCPP President Douglas Carswell.
This entirely new level of dramatic fiscal recklessness and federal overreach demands opposition. The Mississippi Center for Public Policy is standing for federalism and the ability of states to conduct and control their own tax policy without new limitations.
The US House of Representatives passed a $1.9 Trillion bill, dramatically increasing the US budget deficit. Presented as a COVID-19 relief measure, little of the money will be spent on tackling the virus. Instead, it will hose federal funds at every vested interest imaginable.
This massive injection of money will undoubtedly generate more economic activity short term. But it will not mean sustainable growth and will carry long term negative consequences.
According to the Penn-Wharton Budget Model every $1 of spending in this bill will only lift output by around 20 cents.
So economically illiterate is this measure, even economists that normally favor stimulus spending admit that this is not the way to do it. US federal debt as a percentage of output is now close to the level it was at the end of World War II.
Is there any principled idea behind what this bill is up to, or is this simply a product of political opportunism?
The most favorable explanation is that progressives believe that there is hidden slack in the economy, and that added demand will create its own supply.
I believe what we will see instead is inflation, and a weakening of the US economy’s ability to generate wealth in the long term. That means lower living standards, higher taxes, a devalued dollar, and debt.
What can we do about it? Our job here at the MCPP is to help set out the alternative. America is going to need a roadmap to recovery based on the principles of free markets and limited government.
As some test to destruction the idea that government is able to spend its way to prosperity, millions of Americans need to know that we have an alternative. State by state, in Mississippi and beyond, we need a national movement that develops that alternative. The future prosperity and happiness of our children, and their children, depends upon it.
Famed economist Arthur Laffer endorsed HB1439, the Mississippi Tax Freedom Act, legislation introduced by Mississippi House Speaker Philip Gunn that seeks to eliminate the income tax.
Laffer’s work played a foundational role in defining the economic policies that led to tremendous growth under the Reagan administration in the 1980s. His preeminent and lasting work is known as the Laffer Curve. This theory notes that, through taxation, government gains revenue until, at a certain point, the taxation discourages growth to the point that the government actually takes in less revenue.
In 2019, Laffer was awarded the Presidential Medal of Freedom by President Donald Trump for his accomplishments in and contributions to the study of economics.
In a press release sent out by Speaker Philip Gunn, Laffer stated:
“For decades, I’ve worked with state legislators to eliminate the tax that is the single greatest threat to state economic growth and prosperity—the income tax. My hat goes off to Mississippi Speaker of the House Philip Gunn and his colleagues for their bold plan to make Mississippi more prosperous through income tax elimination and fiscal discipline. America is watching. Mississippi has a once in a generation opportunity to re-position itself for economic growth.”
“I am very pleased to have Dr. Laffer’s support for HB1439,” noted Speaker Gunn. “Dr. Laffer’s leadership was a key inspiration for President Reagan’s transformative tax cuts, which set off an unprecedented boom in the American economy. There is no bigger name in tax reform circles nationally than Dr. Laffer. His support demonstrates the strength of HB1439. It is a credit to the hard work of Chairman Trey Lamar, Speaker Pro Tem Jason White, and our House members. As Dr. Laffer said, this is a once in a generation opportunity. I urge Lt. Governor Hosemann and our Senate to work with the House to bring transformative tax reform to Mississippi this session.”
A recent study by Dr. Joshua R. Hendrickson and Dr. Ronald Mau, economists at the University of Mississippi, showcased that the proposal would likely increase gross domestic product in the state by at least $371 million. This growth is in addition to the personal savings that individual taxpayers would experience because of the plan.
Our Senior Vice President for Policy, Dr. Jameson Taylor, interviewed Hendrickson and Mau to discuss their findings. You can read the full interview here.
HB1439 now awaits consideration in the Senate.
What tax plan is best for the people of Mississippi? What kinds of taxes are best for job growth and the economy? Why is tax policy important, in the first place?
Dr. Jameson Taylor recently interviewed two Mississippi economists for the answers. Dr. Joshua R. Hendrickson and Dr. Ronald Mau have studied the real-life effects of the Mississippi Tax Freedom Act (HB 1439) and produced a timely report on how the Tax Freedom Act would grow Mississippi’s economy.
Dr. Hendrickson holds a Ph.D. from Wayne State University and is an associate professor of economics at the University of Mississippi. Dr. Mau holds a Ph.D. from the University of Notre Dame and is an assistant professor of economics at the University of Mississippi.
Dr. Taylor: It seems like the income tax is not something most people think about. People see this money taken out of their paycheck, but don’t realize it’s actually part of their tax bill from the state and federal government. Why is tax policy important for the average Mississippian?
Drs. Hendrickson and Mau: Tax policy is important to the average Mississippian because it affects how much money they really bring home in their paycheck. It also affects the costs of the things that they buy. In addition to other taxes in the economy, these income and consumption taxes reduce household resources available to save or spend.
On a more macro level, tax policy is important because it affects economic activity in the state, a key measure being the total amount invested in the state. When investment income is taxed, investment returns are lower, and investment resources may flow elsewhere. Tax policy can also affect whether businesses want to locate here or workers want to live here.
Dr. Taylor: Tax policy differs quite a bit from state to state. Nine states essentially have no income tax. Five states have no state sales tax. Mississippi is in the middle of the pack in terms of its overall tax burden. How much does tax policy affect where people choose to move?
Drs. Hendrickson and Mau: Tax policy is important. While tax policy might not always be the most important determinant of where a firm or a particular person decides to move, it does matter at the margin. In other words, when a particular person or company is choosing between moving to one state or another, the taxes that one has to pay in each of those states will play a role in that decision.
Dr. Taylor: The Tax Freedom Act essentially eliminates the income tax in exchange for raising the sales tax, excepting a cut to the grocery sales tax. What does the research show is the best way to levy taxes and what are the tradeoffs between taxing income and taxing consumption/sales?
Drs. Hendrickson and Mau: In general, research shows that a consumption-based tax system is preferred to an income-based tax system on efficiency grounds. People have no doubt heard the phrase, “when you tax something, you get less of it.” This is what economists mean by inefficiency. The tax prevents economic activity that would have taken place without the tax.
All taxes create distortions in economic activity, but not all taxes create the same magnitude of inefficiency. When designing a tax system, one would like to generate as much revenue as possible with the smallest distortions possible.
Consumption-based tax systems are preferred to income-based tax systems because the former create fewer distortions—income taxes not only tax labor income but also tax income that comes from savings. A tax on savings income lowers the after-tax rate of return on savings. Due to the nature of compound interest, the costs of taxation increase with the duration of savings.
Think about why people save. They might save to buy a new car, to have money for a rainy day, or for their retirement. Thus, we can think of savings as a way to pay for future consumption. Since the cost of taxation increases with the duration of savings, taxing income from savings is like having a tax on future consumption where the tax rate is higher every subsequent year in the future.
As we said, the goal of tax policy is to raise as much revenue as possible while also trying to minimize the distortions in economic activity that come from taxes. A higher and higher tax rate on future consumption not only creates a distortion, but the distortion gets larger with time. People not only have the incentive to save less, but they have an incentive to save for shorter durations of time.
A consumption-based tax system also creates distortions. However, in contrast to a tax on income, a consumption-based tax system taxes consumption in each period equally. As a result, you get fewer distortions.
Dr. Taylor: Your study finds that the Mississippi Tax Freedom Act (HB 1439) would increase incomes and economic activity in Mississippi. Why is this the case? How would it affect incomes in Mississippi?
Drs. Hendrickson and Mau: Our analysis really highlights the benefits of a more efficient tax system. When it comes to tax reform, what policymakers would like to do is increase economic activity without reducing the amount of tax revenue that they bring in. Of course, that is not easy to do. When you eliminate a particular tax, you eliminate the distortions and increase economic activity. However, you also lose the revenue that tax generates. To make up for that lost revenue, you have to create a new tax or increase another existing tax. Doing so generates revenue but also creates new or bigger distortions. For tax reform to be successful by the terms we just described, the new tax regime would have to be more efficient than the existing regime.
Our analysis shows that eliminating the income tax and replacing the revenue with a higher sales tax increases economic efficiency. This is because the distortions of the sales tax are smaller than the distortions from the income tax. The reason is what we described in answer to the last question. Income taxes tend to discourage savings and investment. As a result, shifting away from the income tax provides greater incentives to save and invest. This is where the economic benefits come in. This increase in investment leads to more production, higher marginal productivity of workers, and higher labor income. Furthermore, as a sign that a more efficient tax system drives this, we find that consumption would increase, despite a higher sales tax. This demonstrates that the economic effects of eliminating inefficiencies more than offset the cost of the tax increases.
A bill that eliminates the income tax for most Mississippi workers has just passed the House, clearing a crucial hurdle in the process to becoming law. If the bill (HB 1439) passes, Mississippi workers would have thousands of extra dollars in their pocket each year.
The bill was authored by House Speaker Philip Gunn and co-authored by Rep. Trey Lamar, Rep. Jason White, Rep. Jeffrey Guice, Rep. Dan Eubanks, Rep. Brady Williamson, Rep. Steve Hopkins, Rep. Chris Brown, Rep. Dana Criswell, Rep. Gene Newman, Rep. Bill Kinkade, and Rep. Jansen Owen.
The bill was passed with a vote of 85 to 34.
HB 1439 will now move onto the Senate for further consideration.
Everybody on a payroll in Mississippi today pays $1 in state income tax out of every $20 they earn – on top of all the other taxes they have to pay. Speaker Gunn’s proposal would raise the threshold for income tax, meaning the first $47,700 earned is tax exempt. For married couples, the threshold would rise to $95,400.
The bill would seek to phase out the income tax over time. It would also cut our state’s extremely high grocery tax in half, from 7% to 3.5% over time. To offset the lost revenue, the bill would increase the sales tax rate by 2.5% from 7% to 9.5%.
“This is great news for Mississippi”, said President of the Mississippi Center for Public Policy, Douglas Carswell. “Giving workers a tax break will boost the state’s economy. It is also morally the right thing for folk to be free to keep more of what they’ve earned.”
“Instead of outright abolition of income tax, it looks like this proposal is a step towards phasing income tax out,” explained Carswell, whose think tank has been at the forefront of efforts to eliminate the tax.
“Instead of asking if we can afford to end the income tax, we ought to ask if we can afford not to. Fast growing southern states like Texas, Tennessee, and Florida don’t have income tax. That’s why incomes in those states are rising and job creation is flourishing. Mississippi could do the same, too.”
“This bill will increase sales tax, which is not normally something we would agree with. However, if taxes must be levied, they should be levied on consumption, rather than income.”
“We are also relieved that this bill proposes lowering taxes on groceries. That will help families struggling to make ends meet.”
“Mississippi needs bold action to grow. We welcome Speaker Gunn’s leadership and encourage swift action by Lt. Gov. Delbert Hosemann.”
If you are interested in signaling your support for income tax elimination, then be sure to sign this petition.
The Mississippi House is considering a bill (HB 1364) that would increase gas taxes and increase debt for the people of Mississippi. The bill caps new bond debt at a whopping $2.5 billion. The bill also indexes the state gas tax according to the U.S. inflation rate. This means that the state gas tax would go up whenever the U.S. inflation rate goes up. Many economists are expecting the U.S. inflation rate to go up in 2021.
HB 1364 has passed out of committee and is already on the House calendar. A vote by the full House is expected early this week.
Responding to the proposed gas tax increase, President & CEO of the Mississippi Center for Public Policy Douglas Carswell said, “It is wrong for politicians to be raising taxes on gas. History shows that these kinds of tax hikes are never temporary.”
“Making Mississippians pay more every time they fill up with gas means less money for them to spend on their own families. It will hit small businesses and folks who live in more rural areas especially hard.”
The gas tax bill also fails to fix a longstanding problem with how Mississippi funds transportation projects. A recent performance audit found that “a lack of competition in the bidding process has been proven to increase MDOT project costs.” More transparency is also needed so that the state prioritizes high-need projects that serve the most people and maximizes economic development opportunities.
“The idea behind this tax hike seems to be to create a pot of money to spend on infrastructure. Why not work out specifically what infrastructure we need, and set a budget for it, before taking more money from taxpayers? That way we might at least ensure we get value for money from any infrastructure projects.”
“Instead of figuring out ways to fleece taxpayers, we need politicians to focus on spending less, and spending it wisely.”
Mississippi lawmakers need to be able to control our own gas tax rate. This bill will tie our gas tax to the federal inflation rate, which is expected to go up. That means the gas tax will automatically go up, and Mississippi will not be able to do a thing about it. Why are we giving over control of our gas tax to Washington, D.C.?
A bill that eliminates the income tax for most Mississippi workers was unveiled today. If the law (HB 1439) passes, Mississippi workers would have thousands of extra dollars in their pocket each year.
Everybody on a payroll in Mississippi today pays $1 in state income tax out of every $20 they earn – on top of all the other taxes they have to pay. Speaker Gunn’s proposal would raise the threshold for income tax, meaning the first $47,700 earned is tax exempt. For married couples, the threshold would rise to $95,400.
“This is great news for Mississippi”, said President of the Mississippi Center for Public Policy, Douglas Carswell. “Giving workers a tax break will boost the state’s economy. It is also morally the right thing for folk to be free to keep more of what they’ve earned."
“Instead of outright abolition of income tax, it looks like this proposal is a step towards phasing income tax out,” explained Carswell, whose think tank has been at the forefront of efforts to eliminate the tax.
“Instead of asking if we can afford to end the income tax, we ought to ask if we can afford not to. Fast growing southern states like Texas, Tennessee, and Florida don’t have income tax. That’s why incomes in those states are rising and job creation is flourishing. Mississippi could do the same, too”.
“This bill will increase sales tax, which is not normally something we would agree with. However, if taxes must be levied, they should be levied on consumption, rather than income.”
“We are also relieved that this bill proposes lowering taxes on groceries. That will help families struggling to make ends meet."
“Mississippi needs bold action to grow. We welcome Speaker Gunn’s leadership."
Part II: The Mississippi Broadband Enabling Act of 2019
In February 2018, Mississippi Public Service Commissioner Brandon Presley announced an $11 million fiber infrastructure project aimed at spanning over 300 miles through 15 rural Mississippi counties. The project was a partnership between cable provider C-Spire and Entergy to bring the emerging fiber-to-the-home technology, which C-Spire had been offering to urban customers since 2013, to rural Mississippians.
Just one year later, Commissioner Presley lauded the strong bipartisan support for his new project, the Mississippi Broadband Enabling Act, which promised to bring fiber-to-the-home technology to the rest of rural Mississippi via the state’s rural electric cooperative associations (ECAs).
Presley told this author that the success of the legislation was the result of perfect timing. He cited the 2019 Mississippi statewide elections in which candidates (including incumbents) were well aware of the widespread support of Mississippians for universal broadband service availability.
Perhaps Presley was being modest. In reality, as reported by Geoff Pender in the Clarion-Ledger: “He created a task force that ended up with 1,310 members over 33 counties. … He got 60 county boards and 70 city councils to pass resolutions in favor of allowing rural co-ops to provide Internet service.”
Presley, in fact, succeeded in convincing lawmakers to reverse a 1942 law (enacted less than a decade after the state’s first rural electric cooperative association was established) that had barred ECAs from providing any product other than electric utility service to their customers. But beforehand, he had to win over enough of the state’s 26 ECAs to the idea that they could provide service even to the most remote customers (as they are required to do for electric utility service) without suffering financial losses.
At the time, only those with crystal balls could foresee the coming COVID-19 pandemic or that Congress – and the Mississippi Legislature – would authorize millions of dollars to make meeting their Internet service obligations that much easier – and less financially risky.
When HB 366 was passed, Presley called broadband “the electricity of the 21st Century,” and hoped for a day when children do not “have to sit in the McDonald’s parking lot to do their homework.” [Again, this was a year before COVID-19.]
Outgoing Mississippi Governor Phil Bryant boasted that, “If anyone wants to know how this bill got passed so quickly talk to the rural electric associations, because we do, and we listen to them.” Lawmakers passed the bill unanimously in the Senate after the House vote had just three “nays.” And with good reason – the ECAs serve 1.8 million of the state’s 3 million people and provide service to half of the state’s electric meters.
Similarly, Mississippi Farm Bureau Federation President Michael McCormick said farmers and ranchers in all 82 counties of Mississippi cited lack of connectivity as a top concern, along with the growing need for telemedicine and distance learning. Moreover, McCormick said, “I’ve talked to some real estate guys, and they tell me five or 10 years ago they would never have someone ask if high-speed Internet is available on a property. Now almost everyone asks the question.”
The 2019 law enables ECAs to establish or allow a separate broadband provider to use their systems to provide service. They can invest or use loans to cover startup costs, but cannot dip into revenues from providing electricity service to subsidize broadband. The law does not require ECAs to offer broadband, and several have so far not opted to do so.
No state funds were allocated for the ECAs, but some federal dollars were already available through existing programs. Then COVID-19 hit, and with it came a cornucopia of federal dollars and programs (see Part III of this series).
Responses by the state’s cooperatives varied widely. The Pontotoc Electric Power Association in February 2020 voted to discontinue its fiber-to-the-home project based on projected costs of $43 to $48 million and a paltry $1.9 million in currently available grant money. But by June 2020 (just before the Legislature voted to pass federal dollars to ECAs) 15 electric cooperatives were already working on plans to build fiber to the home in their coverage areas. All 15 were subsequently awarded one-to-one matching grants.
An elated Presley admitted that the ECA response “exceeds my wildest expectations. We had hoped we would have a couple step out there and then have a snowball effect.”
Part III of this report will discuss the federal CARES Act and federal funding for broadband stemming from the COVID-19 pandemic. Stay tuned.