What’s the difference between a tax cut and a tax rebate? This question may feature prominently during the current legislative session in Jackson.
A tax cut means lowering the amount of tax taken from you by the government. A tax rebate, on the other hand, means the government giving back some of what it has already taken from you.
A cut in taxes is recurring. Unless and until our lawmakers vote otherwise, the amount you pay goes down. With a tax rebate you get a one-off grant – given in an election year.
Mississippi currently has record cash reserves and a large state budget surplus. Being an election year, you won’t be surprised to hear that all our state leaders support the idea of letting taxpayers have more of their own money.
The question that divides them is should this be done as a one-off rebate or as a more permanent reduction in the cost of government?
I am not against a tax rebate. Letting taxpayers keep more of their own money is always a good idea. I just happen to think that the rebate needs to be recurring; in other words, a tax cut.
Why would anyone be skeptical about a one-off grant given by politicians in an election year? You only need to ask the question to answer it.
In 2022, Mississippi’s leaders introduced the largest tax cut in our recent history, reducing the personal income tax rate from about 7 percent to 4 percent. This was a bold move and at a stroke, they made our state more competitive.
For the past thirty years, much of the southern United States has flourished. Tennessee, Texas, Georgia and Florida have prospered. Even Alabama is doing pretty well. Why?
The fastest-growing southern states have low taxes and light regulations. Far from having one-off tax rebates, Tennessee, Texas and Florida don’t have any income tax at all.
But what about our own state? Mississippi has not grown nearly as fast. If we want to be part of the southern success story, we need to cut our taxes to the low level that they are in some of the neighboring states.
In the 2023 legislative session, our lawmakers have the chance to put our state on the road to greater prosperity by giving us meaningful tax cuts, not just a one-off rebate.
Not a single conservative leader in Tennessee, Texas or Florida would run for office proposing the rate of personal income tax that we have in our state today, offset with a mere tax rebate. It is time for our leaders to be just as bold.
“But will we be able to afford it?” I hear you ask. Good conservatives should always make sure that the math adds up.
That is why the Mississippi Center for Public Policy published a Responsible Budget for our state at the start of this session. Working with a former White House economist, Vance Ginn, we show how our lawmakers can keep spending under control and use the large surplus that we have to make tax cuts – not a mere rebate – that we can afford.