Mississippi Today reporters Geoff Pender and Bobby Harrison join Adam Ganucheau to discuss Mississippi lawmakers’ two-day hearings, when experts talked about the pros and cons of cutting the state’s income tax and raising other taxes.
Read a transcript of the episode below.
Adam Ganucheau: Welcome to The Other Side, Mississippi Today’s political podcast. I’m your host, Adam Ganucheau. The Other Side lets you hear directly from the most connected players and observers across the spectrum of politics in Mississippi. From breaking news to political strategy to interviews with candidates and elected officials, we’ll bring you facts, perspectives and context that helps you cut through the noise and understand all sides of the story.
Joining us today are my colleagues, Geoff Pender and Bobby Harrison. Hey y’all, how you doing?
Bobby Harrison: All right. How y’all doing?
Geoff Pender: Hey Adam. Hey Bobby.
Adam Ganucheau: Thanks for being here. Look, I think the last time we got together we sort of talked about how we knew that there were some hearings on Mississippi’s tax code coming up basically.
And that has happened. And I thought that today might be a good chance to talk about it. I know that tax policy isn’t always the most sexy topic to discuss, but I think all three of us would agree that what’s being discussed at the Capitol right now has the ability to truly change the future, financial viability and sort of the future state budget for years and years to come.
So I want to jump into this .You know, I guess, just to recap very briefly to how we got here, in the 2021 session House Speaker, Philip Gunn had this idea. He’s had this idea for several years to fully eliminate individual income tax. And in order to do that, that makes up close to I think one third of the state’s general fund revenue every year.
So a third of the money that we make every year to spend on basic public services comes from the collections of individual income taxes. What Gunn wanted to do in order to sort of fill the void that cutting individual income taxes would leave in the revenue, he wants to increase other taxes, including the sales tax, including some other consumption taxes.
You know, there’s there’s a litany of those, and we can get into that. And honestly, we might not even need to. So when the House passed Gunn’s plan in 2021 session, the Senate didn’t take it up. They weren’t ready. They thought it was rushed. They were seemingly kind of caught off guard by the House passing this proposal.
So what they said in the 2021 session was, “We’re going to study this this fall.” So Geoff, last week you covered the two days of hearings that ended up being this sort of Senate ” study session,” if you will. The headline on your analysis following these two days of hearings I think is just so great, and I think it’s a good jumping off point for you to start talking about is: “Who will lawmakers listen to on taxes: Grover Norquist or Mississippi business leaders?” Geoff, it was an interesting couple of days for sure as you wrote about interesting list of “experts” to talk about everything and for lawmakers on both sides of the aisle to listen to. Tell us about those two days of hearings.
Geoff Pender: Sure. Like you mentioned, these were originally going to be Senate hearings mainly because the House didn’t want to participate after the Senate didn’t take up its plan, but these were going to be Senate hearings broadly on tax policy, broadly on revenue, and instead they kind of morphed into a first off a joint committee eight members each from the House and the Senate. And it became more of a trial litigating Philip Gunn’s plan than it was just a broad tax policy study, so it was really interesting. Both sides, the House and the Senate, sort of each got to pick their experts who testified.
And like I said, it became sort of a trial on Philip Gunn’s tax plan.
Adam Ganucheau: On Philip Gunn’s tax plan, you’ve written about how there doesn’t seem to be really any specific support from any group. I mean, maybe a couple here and there to fully endorse his plan at least. I think there are aspects of it, which is to be fair, a very broad ranging plan that they passed in 2021. But you’ve written all about how it doesn’t seem to have much support.
Geoff Pender: In state. Now it’s gotten some support from a, I guess you would say, some support in theory from some national conservative tax think tanks, and their policy is in general, that consumption taxes are better than income taxes, that they’re flatter or fairer or whatnot. As far as Mississippi groups— and Philip Gunn has traveled the state and talked with a lot of people— there are very few if any Mississippi groups that have just fully endorsed his plans. Some say they in general endorse the concept, but yeah, he’s had trouble getting any actual buy in of his plan, and he’s actually run into some opposition or at the least some real skepticism about his plan.
One group where that’s been seen is some of our business leaders. We saw in these hearings that they appear to be pretty if not outright opposed, they’re pretty skeptical and really fearful of this plan, you know, what a sea change like that could do to our budget and our state economy.
Adam Ganucheau: I want to really quickly read a quote from from Scott Waller who is the head of the Mississippi Economic Council, which is effectively the state’s chamber of commerce. He was one of the invited sort of folks to testify during these hearings, and I wasn’t able to watch this day of hearings live, but Geoff, when I was reading your story before we published it, it was just, I mean, it’s a strong quote here.
Kind of talking about the budget, generally speaking, and you know, all these other needs that we have, Scott Waller, who kind of represents some of the most powerful, successful business people in Mississippi, didn’t really mince words about Gunn’s plan. Here’s the quote, “Where is this in the priorities we have, “Waller said. “We’ve been on the road holding 39 meetings with members all across the state. I know you don’t want to hear this, Mr. Speaker, but this issue has not come up a single time as a priority, something we want to do.” For Scott Waller to say that in this hearing, that is not nothing. I mean, that is a direct sort of counter to the whole purpose of this moment for Gunn, at least from his perspective. Bobby, I’m hoping that you can explain to us why this is such a big deal.
I mean, you know, this proposal that Gunn has laid out and that the House passed earlier this year like Geoff just said it really would be a sea change in sort of how we collect taxes in Mississippi and how we can, you know, work budgets moving forward in the future. So just kind of give us a little bit of context about what this would mean and why this is an important debate right now.
Bobby Harrison: Yeah, there’s a lot going on here.
First of all, we can’t miss in this whole debate that actually Governor Tate Reeves has his own plan, and his plan is just to eliminate, phase out the income tax. Essentially one third is state revenue that you talked about Adam, and his plan is not to raise any other taxes just to phase out the income tax.
So that’s going on and what both plans have in common is the elimination of the income tax. And in Mississippi, that’s a big deal for a number of reasons. First of all, we’re the poorest state in the nation. At the same time, our tax system is regressive, meaning that poor people pay more and a greater share of their income in taxes than do the more affluent people.
And the income tax is the one tax that we have in this state where more affluent people pay more than less wealthy people, and not a lot more, but a little bit more. And if we eliminate the income tax, it’s just going to put more of the tax burden on low and middle income people. I mean, there are studies that show that and plus it’s just common sense. You know, because essentially the speaker’s plan through the first several years actually produces more revenue than it takes away because you raise the sales tax and most excise and consumption taxes by 2.5%, so that’s gonna put more of the burden on the poor and the less fortunate. That was not talked about a lot during the hearings. Actually, state economist Corey Miller talked about it a little bit.
He said one of the tenants of a good tax system is tax fairness. And he said that the consumption taxes, sales taxes are regressive taxes and the income tax, generally, it’s not a regressive tax. But most of the folks that Geoff referenced, the conservative think tanks from out of state and and some business leaders from in-state too, most were against it, but there were some people who spoke in favor of it.
They expressed less concern about how it was gonna impact the poor and the middle-class, but they were more concerned that there’s going to be a two, two and a half cent increase on their taxes. So this is going to be a big deal if it goes through. I think it’s going to be difficult. I think that there’s going to be a lot of different proposals out there when everything is said and done, and I don’t know if they can get a three-fifths vote on it, which it takes to to pass a tax increase. We’ll have to see, but it’s going to be a big deal during the 2022 session, I think whether it passes in the House.
Adam Ganucheau: Bobby, you’ve written about how, you know, talking about sort of the, the tax burden and how it would shift to, you know, people who aren’t as wealthy because they’d have to pay more of a percentage in sales taxes as they would income. You’ve written about how that disproportionately affects people of color in Mississippi as well.
Bobby Harrison: That’s just common sense again, cause we have, you know, there’s poor Mississippians, black, white, and and different races and ethnicities.
But I mean, we have more poor black people than poor white people. I mean, at least percentage wise. So, I mean, it just makes sense it’s gonna impact those people more. And, I just, you know, I do fear that that’s not being talked about enough. And in fairness to the speaker, he did try to address it to a certain extent.
We have the highest state imposed sales tax on groceries in the nation, which is the, probably the most regressive of all taxes, you know, because you know, to be taxing food and stuff like milk and those types of items, and his proposal will cut that sales tax, which is 7% now in half over a period of years.
So, I mean give him a little credit for that. He made an effort, but studies still show that even after that sales tax on groceries goes into effect that it still is overall tax policy, if the speaker’s proposal passes, that puts more of a burden on the middle class and lower income Mississippians.
Adam Ganucheau: Another big group of Mississippians who’ve been talked about as it comes to this point as retirees. Retirees don’t currently pay income taxes. So the argument against this would be, they’re already kind of getting a break by not having to pay income taxes. So what you’re really doing, if Gunn’s plan were to pass, is you’re increasing retirees’ sales taxes without giving them another break anywhere else, so really their taxes would be going up.
That’s at least the argument that’s being made. In these hearings, it was made by a senior Republican Senator John Polk from Hattiesburg. His quote was, “My seniors who are retired they don’t pay income taxes, and they will pay a 36% increase in sales taxes. 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 me. I’m about to throw you under it.” Another very strong quote, sort of in direct opposition to Gunn’s plan here. Geoff, I’ll ask you this in closing, after sitting through these hearings and covering them and talking to folks during and after, what do you make of the speaker’s chances, the speaker’s plans, chances moving forward? I mean, post hearings, and as we’re looking ahead to the 2022 regular legislative session, what do you make of chances of this thing going anywhere?
Geoff Pender: I think number one, I think his plan in toto, I don’t foresee that passing. There’s too much. We just rattled off numerous groups that are either skeptical or opposed to it. And I mean, keep in mind, manufacturers. They’ve got that fear of tax pyramiding, where they’re getting hit with sales tax when they go buy raw materials or commodities to make their widgets, then taxed again on equipment, then they have to pass on tax again when it sells.
So I mean, those are all pretty powerful groups, including retirees, and again, teamed up with advocates for the poor and the poorest state in the union. What I think is far more likely than Gunn’s total plan passing is an income tax cut.
Either they start taking a bite out of the 4% bracket. Right now we have a 4% and a 5%. We did away with the lowest in the process of it. But I think it’s far more light
Bobby Harrison: It has not phased out yet.
Geoff Pender: I think it will be by next year. Far more likely they’re going to do an income tax cut. Now whether they do that in a phase out of the 4% or if it’s a one-time flat cut, I suspect there will be some talk of at least calling it a phase out. But as far as the swap, which Philip Gunn keeps saying, “Now don’t call it a tax swap,” but I just don’t see the full plan passing. I think it’s way more likely. Now there is appetite for an income tax cut or a tax cut given the state’s finances right now way above projections. I would almost guarantee we’ll see some, some sort of tax cut, but don’t see the plan.
Adam Ganucheau: Bobby. Do you agree?
Bobby Harrison: Yeah. And I don’t think it’s a bad deal, a bad plan to do a study of the state’s tax system. I think that was, you know, that was actually a good thought. Now, you could argue that the people they brought in for that study, were kind of slanted one way.
All, most of them, were opposed to the income tax and supported the consumption and sales taxes, but there’s a lot of things. Look, you know, y’all been talking about retirees. Now, I mean, I would argue that, you know, that a retiree you making $100,000 a year, and they’re out there, you know, they might be in a better place to pay some income tax, some state income tax than somebody making $40,000 a year with two kids.
And so, I think those are some of the things that, you know, would be nice to look at. I mean, I’m not saying tax all retirees, but I mean, but there’s wealthy retirees out there, and I hope to be one of them one day. Probably won’t be, but there’s wealthy retirees out there that can afford to pay taxes more than a family of four earning $40- 50,000 a year and having to put a couple of kids through school and pay for college and all those things. So, I mean, I think there’s a lot of things like that they could look at, but—
Geoff Pender: I’m going to go out on a limb and predict that does not get looked at very closely.
Bobby Harrison: Well the fact that it is not looked at doesn’t mean that we should not point it out that that might be an inequity in the tax system. And you know, there’s no greater inequity I think than the grocery tax. And so, you know, whether they will look at that or not, I don’t know. Mississippi loves its sales tax.
I mean, you know, we talked about the income tax being about a third of the state revenue, a little bit less than a third. You know, the sales tax and other consumption taxes, excise taxes and stuff, already makes up about 38% of the overall state revenue, so Mississippi is already heavily dependent on its sales tax.
And, you know, maybe we should look at some areas there. Will we? Geoff’s right, probably not, but I think part of our job is to just point out different options out there and see what legislators do about them.
Adam Ganucheau: Sure. Well, y’all both have been all over this, and it’s certainly helpful to hear your perspectives on it. Geoff, your analysis like I said, if anybody wants to go read, that headline, like I said, is: “Who will lawmakers listen to on taxes Grover Norquist or Mississippi business leaders?” That posted on August 31st of this year. If you have listened to this episode, and you’re still wanting to hear more about all this, I’d encourage you to scroll back in our podcast list. I think it’s about 24, 25 episodes ago published on February 28th of this year. I sat down with Speaker Gunn and asked him all about his plan and what he wants to do. So if you want to hear more about that, you can. And I mean, Geoff, Bobby y’all will continue covering this closely and looking forward to it and thank you all so much for everything.
Bobby Harrison: Thanks guys.
Geoff Pender: Thanks.
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