Corporations with headquarters outside the Magnolia State stand to benefit most from the elimination of the corporate franchise tax, a Mississippi Today analysis of ten years of state tax data shows.

Of the $278 million in franchise tax collections in fiscal year 2016, out-of-state companies accounted for $215.9 million — 78 percent — of that total, according to Department of Revenue figures. Just 22 percent came from in-state companies.

State leaders who pushed for the elimination of the franchise tax argued that it would lead to more jobs and more investment by companies in Mississippi but there is no mandate that companies reinvest their savings from elimination of the tax.

The franchise tax is imposed on all corporations with a capital presence in Mississippi, and it is the sixth-largest tax revenue source annually. Tax revenues feed the general fund, which funds state agencies and departments to provide basic public services.

The hallmark of the 2016 tax cut — the largest in state history — was the complete elimination of the franchise tax, which will be phased out by fiscal year 2029. Corporations, beginning on Jan. 1, will pay $0.25 less per $1,000 in assets each year for 10 years until that rate hit zero in 2028.

In the past ten fiscal years, the state has collected about $2.3 billion in franchise taxes, and out-of-state companies paid an average of about 72 percent of the total in that same period.

In 2016, out-of-state companies paid an average of $7,024 each in franchise tax, while in-state companies paid just $1,686 each.

“A major part of the reason for elimination of franchise tax is to make Mississippi more competitive when trying to attract new jobs in the future,” said Lt. Gov. Tate Reeves, a leader in pushing for the cuts. “I think we’re going to create an environment which encourages the private sector to invest capital in Mississippi and create jobs for Mississippians.”

However, the state does not mandate any job creation or future investment by out-of-state companies that benefit from the franchise tax cut.

“Just because they’re based out of state doesn’t mean they don’t have operations in the state of Mississippi,” Reeves told Mississippi Today in a telephone interview on Tuesday.

“For instance, Ingalls Shipbuilding is headquartered outside of the state. They’re one of these ‘big, bad out-of-state corporations,’ but they employ 12,000 people in Mississippi,” Reeves said. “Caterpillar is another out-of-state corporation, but they employ hundreds in Alcorn County, Mississippi.”

“I believe in the future that we are better positioned in job creation efforts and attracting capital, both in state and out of state, than we were before the corporate franchise cut,” Reeves said.

Reeves reiterated his trickle-down economics approach: Corporations will take the money that they would previously have paid in state taxes and invest it in capital expansions and create new jobs. If all goes according to plan, those companies’ Mississippi employees and consumers would benefit with more money in their pockets.

Economic experts are split on whether the tax cut will be an economic driver for Mississippi.

Nicole Kaeding, an economist at Washington-based Tax Foundation and adviser to legislative leadership, said in July that the tax cut “will be a revenue loss to the state” but that the cut is “good policy” and should help attract business.

State Economist Darrin Webb, who runs the state-funded, non-partisan research department, has expressed doubt about whether the cut will pay for itself.

“I don’t think (the tax cut) will generate enough activity to fill the hole it will leave in revenue,” Webb said in June. “Other states didn’t have it and it may help (bring some business to Mississippi), but it’ll take an awful lot of companies coming here from other states to get close. It’s not going to create a boon for the economy.”

Democratic leaders have long questioned whether eliminating a major revenue source when lower-than-expected tax revenue collections have already forced several budget cuts. Even some Republicans have publicly expressed concern about the cut’s potential effect on future revenues.

Rep. Becky Currie, R-Brookhaven, publicly called for a delay in the implementation of the tax cut.

“It’s going to be hard to balance when you’re not getting in extra dollars that we’re counting on,” Lynn Fitch, the Republican state treasurer, told Mississippi Today in a brief interview at the Neshoba County Fair.

“It’s a wait-and-see at this point, but it’s going to be a significant issue,” she continued. “The hope, of course, is that it’s an economic driver. We absolutely want that. We’ve only got estimated numbers, but we know it’s going to be tough because we’re already so behind in collections.”

Tax collections in Mississippi fell $170 million below expectations in fiscal year 2017, a year that saw three mid-year budget cuts to offset the lower-than-expected collections. The fiscal year’s budget, which ended June 30, will be balanced in large part by one-time reserve and settlement transfers and special fund sweeps authorized by an eleventh-hour law passed in 2016.

In addition to the franchise tax elimination, the 2016 tax cut also will eliminate the 3 percent individual income and corporate income tax brackets by fiscal year 2022 and allow self-employed Mississippians to exempt a portion of their federal self-employment tax on their state tax filings by 2020.