Black and Hispanic Mississippians pay a larger percentage of income in state and local taxes than higher earning white Mississippians, a new study says.
“Black households pay an average of 8.7% of their income in state and local tax while Hispanic families pay 9.1%,” according to a recently released study by non-profit One Voice, based on data compiled by the Institute on Taxation and Economic Policy. “Those rates are significantly above the statewide average tax rate of 8.4% and the average rate paid by white households of 8.2%.”
The studies have been conducted at least in part because legislative leaders are considering significant changes to the state’s tax laws. Gov. Tate Reeves wants to phase out the state’s income tax, which accounts for about one-third of the state’s general fund revenue stream, without offering any additional tax increases to offset the lost funds. House Speaker Philip Gunn is proposing a massive tax swap that includes increasing the state’s sales tax while phasing out the income tax.
A joint House and Senate committee formed by Lt. Gov. Delbert Hosemann and Gunn is preparing to have hearings on the state’s tax structure.
The recently released study, as well as one earlier this year, compiled by One Voice and the Institute of Taxation and Economic Policy argue both Reeves’ and Gunn’s plans would further escalate the tax burden on Mississippi’s low income families while giving the wealthy a tax break.
According to the most recent study, the bottom 80% of Mississippians — earning less than $77,500 annually — pay a greater percentage of their income in state and local taxes than do those in the top 20%.
Kyra Roby, a policy analyst for One Voice, said, the top 20% of taxpayers “are paying proportionately less than they should be, which is why the bottom 80% has to pick up the slack and pay more than what would be proportionately fair. This amounts to a 1.1% income boost for the top 20% and a 1.6% income penalty for the bottom 80%. In other words, in order for the top 20%’s share of income to be equal to the share of taxes paid, they’d need to pay 1.1% more of their income on taxes. In order for the bottom 80%’s share of income to be equal to the share of taxes paid, they’d need to pay 1.6% less of their income on taxes.”
The first One Voice study released in March found a person in the top 1% with average income of $924,000 would pay $28,610 less per year in combined state taxes under Gunn’s proposal, while the next 4% of state income earners would save about $3,760 in taxes on average. Based on the analysis conducted by the Institute of Taxation and Economic Policy, those earning $49,100 or above would pay less in taxes under the Gunn plan, while individuals earning less than that would pay more in state taxes than they currently are paying.
Both studies found that under the state’s current tax structure the income tax is the only mechanism that places more of a tax burden on the wealthiest than on low income Mississippians.
The sales and excise tax exacerbates the inequity, according to the study. The study found that Mississippi’s Black households pay on average 30% on average above the level paid by white households in sale and excise taxes while Hispanic households pay 27% above average.
The reason for the discrepancy is that the sales and excise taxes place a greater burden on the poor and Black and Hispanic households in Mississippi are more likely than white households to fall into low income categories.
While Gunn and Reeves want to eliminate the income tax, One Voice advocates:
- A more graduated personal income tax structure that would result in the wealthy paying more.
- The elimination of the personal income tax exemption for the wealthy.
- The reduction of the state’s dependence on the sales tax.
- An estate tax levied on the wealthy. Mississippi is among the 38 states without an estate tax, according to the Center for Budget and Policy Priorities.
One Voice advocates for Mississippi’s poor and working families. The Institute on Taxation and Economic Policy is a progressive think tank that provides analysis of federal, state and local taxes.