Democrats: Halt franchise tax cut to pay for highways

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Zachary Oren Smith, Mississippi Today

Sen. Hob Bryan, D-Amory

Four Senate Democrats proposed Wednesday that the franchise tax cut passed this spring be repealed, with the $416 million annually generated by that tax diverted to pay for highway and bridge repairs.

“We need revenue that we can direct to all Mississippians without dealing with a reduction of other services or tax increases to citizens,” said Sen. Sollie Norwood. He was joined in making the proposal by Sens. Angela Turner of West Point, Hob Bryan of Amory and David Blount of Jackson.

The four noted that because the franchise tax cut has not gone into effect, it would be a feasible way to fund roads and bridges without raising taxes.

“We’re not going to be able to maintain roads and bridges without general fund revenue,” Bryan said. “Generally speaking, the gasoline tax has been how the highway department has been funded, but that is not a feasible way to fund roads in the future.”

“Here is a plan,” Blount said. “Here is six and a half billion dollars over the next 20 years without raising taxes on any Mississippian or any Mississippi businesses.”

“There are a lot of studies being directed at our tax system,” Blount said. “We believe in tax fairness for middle class Mississippians. We believe that this is a necessary and essential first step to address our infrastructure needs.”

Republican legislative leaders promoted ending the franchise tax as a means of promoting economic development in the state.

The Department of Revenue says the current state franchise tax is calculated at $2.50 per $1,000 of the capital employed or the assessed property values in Mississippi, whichever is greater. Under the tax cut, the first $100,000 of taxable capital would be exempt beginning in 2018. Beginning in 2019, the rate would be reduced by 25 cents every year until the tax is fully repealed in 2028.

Legislative study committees appointed by Lt. Gov. Tate Reeves, R-Florence, and House Speaker Philip Gunn, R-Clinton, have been conducting hearings to study state spending and taxing practices.

The legislative leaders have indicated that the tax cuts enacted this spring are also under review. However, they have spoken of the franchise tax cut in terms of enacting that cut earlier than 2018, which is the current target in the law passed this spring. In fact, an outside tax consultant has advised the committees to repeal the franchise tax faster.

In a statement from Lt. Gov. Tate Reeves’ office, Laura Hipp said that in response to the Democrats’ proposal Reeves “believes raising taxes on either Mississippians’ income or employers’ investment in the state will hamper long-term economic growth.”

House Speaker Philip Gunn had no immediate comment.

Senators (from left) Angela Turner, D-West Point, Hob Bryan, D-Amory, David Blount, D-Jackson, and Sollie Norwood, D-Hinds, discuss their propsal for more highway funding.

Zachary Oren Smith, Mississippi Today

Senators (from left) Angela Turner, D-West Point, Hob Bryan, D-Amory, David Blount, D-Jackson, and Sollie Norwood, D-Hinds, discuss their propsal for more highway funding.

Bryan noted that the first step is developing a legislative coalition that would back a repeal of the franchise tax cut.

“The bottom line is that this tax cut took an enormous amount of money out of the general fund,” Bryan said. “If you took that same amount of money and put it in a fund by itself, you could make enormous strides in repairing the highways, municipal streets, and county roads. We could make a dramatic impact on improving our transportation infrastructure in Mississippi.”

“It’s a political choice,” Bryan said of the franchise tax cut, “to take that money and send it in a tax cut skewed to more wealthy people and skewed toward out-of-state corporations.”

One important detail not worked out in their proposal is how franchise tax funds would be diverted to highway and bridge construction. There is not currently an apparatus for general funds to be appropriated from the general fund.

The Department of Transportation is a special fund agency. While the Legislature appropriates funds to the department, all the money appropriated comes from fuel tax revenue, the federal government and assorted fees. The agency also receives some funds through bond sales for construction.

Four studies in four years have assessed the need for infrastructure investment and efficiency of the Department of Transportation and called for additional highway funding. The senators called highway infrastructure improvements a critical issue in the upcoming legislative session.

“We know the condition of our infrastructure is critical,” said Turner, “and it is only becoming more and more serious.”

“In previous years, we have not really acted on the issue that is before us, but then we find ourselves at a point now, with this tremendous tax cut, a need to repair roads and bridges and other forms of (infrastructure),” Turner said.

“It’s irresponsible for us to allow this law to remain on the books,” Turner said. “To allow this tax cut to be implemented years down the road without a financial plan in place to take care of those services that we all need.”

“We want Mississippi to grow,” she said. “We want people to come and travel our state, but then we don’t have the infrastructure system to accommodate that. It’s just fiscally irresponsible for us to let this (franchise) tax (cut) go forward. We need a plan in place.”