A panel of lawmakers on Wednesday and Thursday will hold hearings on how, why, or if Mississippi’s individual income tax should be eliminated or cut and whether other taxes should be raised.
The joint Senate and House Tax Study Committee — eight lawmakers from each chamber — will hear from conservative and liberal tax think tank experts, state tax, economic and budget experts and business leaders. These will include Grover Norquist, founder of Americans for Tax Reform, and Kyra Roby, a policy analyst at One Voice, a group that represents marginalized and vulnerable communities across the South.
The impetus of the hearings is House Speaker Philip Gunn’s proposal to eliminate the state’s individual income tax, and replace revenue with a 2.5-cents on the dollar increase in the state’s current 7-cent sales tax and increases in other user or “consumption” taxes. The plan would exempt most Mississippians from individual income taxes in its first year, then totally phase it out over a decade or so, dependent on revenue each year meeting a “growth trigger” of 1.5%. Annual state revenue growth has averaged about 3.2% for the last 10 years.
Gunn introduced his proposal in this year’s legislative session. It passed the House but was killed in the Senate without a vote. Senate leaders said they wanted to study the issue this summer and feared Gunn’s sea change in taxation had not been fully vetted for unintended consequences.
Gunn has toured this state this summer pitching his proposal to business leaders and civic groups, using the common refrain: “I want you to keep more money in your pocket.” He said his proposal to shift Mississippi’s tax burden to sales, use or consumption taxes is fairer and will generate a net decrease in taxes for nearly all taxpayers. He also proposes cutting the 7% sales tax on groceries in half.
But Gunn’s plan has raised concern from numerous interests. Advocates for poor and moderate-income Mississippians and retirees fear it would shift more of the state’s tax burden on them. Big business interests such as manufacturers and some small business groups fear the sales tax increases in the plan would increase their “input” costs drastically down their supply chains. Some lawmakers on both sides of the aisle fear the major change in tax structure — individual income taxes generate about $1.8 billion a year, or 32% of the state’s revenue — would tank the state budget.
Gunn’s fellow Republican, Gov. Tate Reeves, has also proposed eliminating the state’s individual income tax, but without any commensurate increases in other taxes. He has criticized Gunn’s “tax swap.” On Tuesday, Reeves praised lawmakers for considering income tax elimination, but reiterated it should be done without raising any other taxes. He said the state ending its budget year in July with more than $1 billion over projections shows the tax could be phased out without raising sales or other taxes.
Reeves did not answer whether Gunn’s proposal would be subject to his veto stamp if passed next year, but said, “I’m opposed to taking less from you here and taking more from you there … If we swap taxes instead of eliminating them, we will never be able to get rid of them once and for all.”
Gunn has countered that it would be irresponsible to eliminate the income tax without replacing it with other revenue, and that it could not realistically be phased out sooner than decades from now based solely on revenue growth.
It appears some of the House team appointed by Gunn will use the hearings to try to sell Gunn’s plan. But Senate leaders including Lt. Gov. Delbert Hosemann said they want to use the hearings to not only vet Gunn’s plan but to gain a broader understanding of the state’s tax structure and look at other options, including tax cuts without total elimination of individual income taxes.
Senate Finance Chairman Josh Harkins, R-Flowood, has been a lead organizer of the tax hearings.
“I’m not necessarily interested in litigating (the House) plan, as much as I am to provide information for everybody to consider what’s next,” Harkins said. “My goal is to educate and inform, and have discussions on the concept and the value of tax cuts, and what is a more efficient system and why, and what are other states doing … I want to make sure whatever we come up with is a responsible and durable solution, one that can withstand the ebbs and flows of the economy.”
Harkins said he does believe there is a broad “appetite for some type of tax reform” and cuts in the Legislature.
“I think that’s definitely on the table, but to what extent, I think we’ll know more after these hearings,” Harkins said.
Lawmakers over the two days will also hear from representatives of the national Tax Foundation and the National Taxpayers’ Union, from Mississippi’s state economist and two University of Mississippi economists who analyzed Gunn’s plan. Presenters will also include business leaders with the Mississippi Economic Council, officials with the state Department of Revenue and the Legislative Budget Office, Empower Mississippi’s Russ Latino and businessman and talk radio host Gerard Gibert.
The lawmakers appointed by Hosemann and Gunn for the joint committee are:
Senate: Harkins, R-Flowood; Hob Bryan, D-Amory; Briggs Hopson III, R-Vicksburg; Chris Johnson, R-Hattiesburg; John Horhn, D-Jackson; David Parker, R-Olive Branch; John Polk, R-Hattiesburg; Angela Turner Ford, D-West Point.
House: Trey Lamar, R-Senatobia; Jody Steverson, R-Ripley; Nick Bain, R-Corinth; Shane Barnett, R-Waynesboro; Robert Johnson III, D-Natchez; John Read, R-Gautier; Jason White, R-West; Hank Zuber, R-Ocean Springs.
The hearings begin at 9 a.m. in Room 216 at the Capitol and can be watched online on the Legislature’s website.