The Mississippi House of Representatives passed a sweeping proposal Tuesday that would completely phase out the personal income tax over 10 years and immediately, starting on July 1, put in place the largest statewide sales tax in the nation at 9.5% on most retail items, excluding groceries.
READ MORE: House leaders move to eliminate Mississippi income tax, raise sales and other taxes in landmark bill.
Mississippi already has the second highest statewide sales tax at 7%, trailing only California at 7.25%, according to the Tax Foundation. But most states, including California, either have a lower sales tax on groceries or completely exempt the tax on groceries. In Mississippi, the current full 7% tax applies to groceries.
The bill, beginning July 1, would lower the rate on food to 4.5% and over a five-year period reduce it to 3.5%.
And, importantly, Mississippi in most cases prevents local governments from imposing an additional sales tax. Jackson has a 1% tax and Tupelo has a .25% tax, but other local governments have no authority to levy a sales tax with the exception of a so-called tourism tax on restaurants and hotels.
With a 9.5% sales tax rate, excluding that on groceries, Mississippi still would be competitive with the sales tax rates of its contiguous states when factoring in local sales tax rates, according to Tax Foundation numbers.
- Alabama: 4% state rate, average local of 5.22% for total of 9.22%.
- Arkansas: 6.5% state rate, average 2.97% local for total of 9.47%.
- Louisiana: 4.45% state rate, average 5.07% local for total of 9.52%.
- Tennessee: 7% state rate, average 2.53% local for total of 9.53%.
It is important to note, in many parts of the neighboring states, their rates still would be higher than the sales tax rate in Mississippi. If the bill becomes law, Mississippi would be at 9.5% with the Tax Foundation saying the average local rate was $0.07 because just two cities — Jackson and Tupelo — have a local option. In the neighboring states, all local governments have local options, and in some areas the rates are more than 10%.