Late last week, Gov. Phil Bryant signed the Mississippi Taxpayer Pay Raise Act of 2016, a tax cut totaling $415 million over a decade.
Here’s a short breakdown of how it works:
- Elimination of the 3 percent tax bracket by 2022, starting in calendar year 2018. Mississippi currently has three tax brackets. Now, the first $5,000 of taxable income is taxed at 3 percent; the next $5,000 is taxed at 4 percent. Taxable income over $10,000 is taxed at a rate of 5 percent. Under the tax plan, $1,000 of the first $5,000 would be exempted in 2018, then another $1,000 each year until the bracket is phased out, saving taxpayers about $30 per year. Getting rid of the 3 percent bracket will ultimately save individual taxpayers $150 every year, architects of the tax cut say.
- An estimated 160,000 self-employed Mississippians will be able to deduct half of their self-employment taxes paid to the federal government by the 2019 calendar year. The Internal Revenue Service allows self-employed people to deduct half their federal tax liability. Under the Mississippi tax cut, self-employed individuals would be able to deduce 17 percent of their federal self-employment tax liability in 2017, 34 percent in 2018 and, finally, 50 percent for 2019 and subsequent tax years.
- Phasing out the franchise tax, assessed for the privilege of doing business in the state of Mississippi. Franchise tax is calculated at $2.50 per $1,000 of the value of the capital employed or the assessed property values in Mississippi, whichever is greater, according to information from the Department of Revenue. Beginning in 2018, the first $100,000 of taxable capital will be exempt from the franchise tax. In 2019, the tax cut reduces the rate by 25 cents every year until the franchise tax is fully repealed as of Jan. 1, 2028.
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