House Ways and Means Chair Trey Lamar, R-Senatobia, said if legislators look at reducing or eliminating the income tax this session, they should also explore reducing the 7% sales tax on groceries.
“I don’t understand why we have to be 50th in that,” he said, referring to Mississippi having the highest state-imposed sales tax on groceries. A few states that allow local governments to impose an additional sales tax on top of the state levy, such as Alabama, have a higher tax on food in some local jurisdictions, but no state has a higher statewide sales tax on groceries.
In November, Gov. Tate Reeves proposed phasing out the income tax over a multiple year period. In the past, House Speaker Philip Gunn, Lamar and other House leaders also have endorsed reducing or eliminating the income tax. But Lamar said recently as his committee looks at the income tax issue this year it should include an in-depth look at the tax structure.
“We want this to be a bipartisan effort,” Lamar said. Many Democrats have long championed eliminating the grocery tax.
The 7% tax on food generates between $267 million and $315 million annually for the state. Lamar, who chairs the powerful House committee that handles tax and revenue legislation, said that reducing or eliminating the income tax and the sales tax on food would require some type of shift to another tax or source of revenue to generate funds for the state.
“Whatever we do, I do not want to do harm to the state budget,” he said. In addition, Lamar said he wants his committee to work on the issue this session, but he acknowledged it may take more than a year to complete the process.
Lamar’s counterpart, Senate Finance Chair Josh Harkins, R-Flowood, also said he will study the issue of the income tax cut this session.
“We need to take a deep dive into fiscal policy and take a look at what we can to do to be more competitive,” he said. But Harkins added legislators need “to be responsible” to ensure that tax cuts do not put the state in a financial bind.
“I tell people part of fiscal conservatism is fiscal responsibility. We have to be careful how we do it if we do it,” he said when asked specifically about cutting the income tax.
Under the current tax structure, a family of four earning $80,000 would owe $2,489 in state income taxes.
The income tax generates about $1.9 billion in revenue and accounts for about one-third of the total general fund revenue. In 2016, the Legislature passed and then-Gov. Phil Bryant signed into law a massive tax cut that will reduce revenue to the general fund by an estimated $416 million annually in today’s dollars by fiscal year 2028. Part of that tax cut was the phase out of the 3% personal income tax bracket.
For years, Mississippi has placed a 3% tax on the first $5,000 of taxable income, 4% on the next $5,000 and 5% on taxable income over $10,000. The legislation passed in 2016 began the phase out of the 3% bracket starting in fiscal year 2019. That phase out will conclude in 2022 and result in a reduction to the general fund of about $150 million, according to the Department of Revenue.
Reeves wants to continue that phase out to completely remove the income tax. He and others argue it would promote economic growth and even attract new residents to the state.
Others dispute that argument and say history does not bear out the fact that the growth will occur. And many say the income tax should not be reduced or eliminated while Mississippi – the poorest state in the nation – levies the highest tax in the nation on food.
Plus, Lamar said, reducing or eliminating the food tax would benefit everyone.
“Republicans have to eat. We all have to eat,” he said.