For the first time in a generation, Mississippi has the ways and means to tackle its desperate needs in education, health care and infrastructure.
So it makes perfect sense that lawmakers this summer are focused on… eliminating income taxes, raising sales taxes and haggling over marijuana.
A select panel of 16 House and Senate lawmakers, plus House Speaker Philip Gunn, who apparently also selected himself, held two full days of Tax Study Committee hearings last week.
Once upon a time, the hearings were supposed to be for rank-and-file senators to examine the nuts and bolts of state taxation and budgeting. This was called after the Senate balked last session at passing — or even voting on — Gunn’s House-passed plan to eliminate personal income taxes and increase sales and other “consumption” taxes. Senate leaders vowed to gather information on what, if any, reform is needed with Mississippi’s tax code.
But this morphed into a joint House-Senate committee, and the hearings morphed into a trial to litigate Gunn’s proposal. The select House leaders appeared to have been selected mostly for their support of Gunn’s plan, and then he joined in — sitting at the head table and promoting his measure any chance he got. At one point he apologized to the committee if they got the vibe that his plan is “the only option.” Then he pointed out his plan was the “only one on the table,” and continued to pitch his plan in questioning of presenters for the next day and a half of hearings.
One major upshot of the trial — or hearings — is that conservative think-tank folks believe that while all taxes are bad, income taxes are particularly onerous and sales taxes are better. The switch, they said, is likely to cure all of poor Mississippi’s ailments. Liberal tax folks believe the opposite, saying a shift to sales taxes hits poor to moderate income people and retirees hardest, and eliminating income taxes could make it hard for the state to provide services such as education and roads, especially in an uncertain pandemic economy.
And the business folks in Mississippi appear terrified that lawmakers are about to monkey with the works and mess things up just when it appears the economy is stabilizing from the pandemic and state coffers are flush from federal spending. They particularly appear worried about the plan’s sales tax increase from 7% to 9.5% and increases to other taxes. They also share concerns the move could overall hurt state efforts to improve education, health care, workforce development and infrastructure — higher priorities for them.
Future deliberations on the tax plan may boil down to who lawmakers are going to listen to: Grover Norquist, author of the Taxpayer Protection Pledge who spoke to lawmakers last week, or state business leaders who drive Mississippi’s economy.
Another upshot of the hearings: Senate leaders, on both sides of the aisle, are still not sold on Gunn’s income tax-sales tax proposal.
Sen. John Polk, R-Hattiesburg, said his hometown is a “certified retirement community,” and many of his constituents are retirees.
“My seniors who are retired, they don’t pay income taxes, and they will pay a 36% increase in sales taxes,” Polk said. “How do I get reelected if I tell them I support this? … So I’d be saying, here’s the bus you can get in front of, I’m about to throw you under it.”
Gunn countered that his plan also reduces taxes on groceries from 7% to 3.5% and any tax increase to retirees would be minuscule, plus they could “give the gift to your grandkids of a life free from income tax.”
At this point, a modest income tax cut would appear the more likely outcome of next year’s legislative session than Gunn’s major overhaul.
In a press release after last week’s hearings, Gunn said: “We believe the House plan to eliminate the income tax is a sound plan. But we fully embrace the Senate’s desire to study the issue deeply … The economists and tax policy experts overwhelmingly testified that repealing the income tax and replacing it with a consumption tax is good policy … There is an overwhelming consensus in favor of tax reform … The burden is now on us to deliver our citizens tax relief and prosperity. If we fail to do that, we will owe them an explanation for our continued inaction.”
Gunn might be overselling with his take on the hearings. Many presenters were careful not to take a position on his actual plan, others were lukewarm on the concept and one (from the only liberal-leaning think tank invited to the show) called it “terrible tax policy … yet another tax break for the state’s wealthiest.”
So far, the tax debate and medical marijuana have been the main policy focuses of lawmakers with hearings in the off season this year.
This comes as the state is receiving billions in federal pandemic stimulus spending, and the state budget has a $1 billion surplus (mostly from the billions in federal spending). Historically poor Mississippi is historically flush, and this has some lawmakers calling for the focus to be on addressing long underfunded state needs, not retooling taxes.
“We’ve got such a robust surplus,” said Sen. John Horhn, D-Jackson. “… A judge has appointed a monitor for our community based mental health system. What would it take to get out from under DOJ on that? … We’re $400 million underfunded on (the Mississippi Adequate Education Program). Our public employee retirement system is in trouble. With corrections, we have the possibility of the federal government coming in and forcing us to make changes. (The state chamber of commerce) said we need $350 million more to fund maintenance of our roads … My concern is for unfunded or underfunded things.”