A day after the massive tax cut bill championed by Republican Speaker Philip Gunn passed the House, a member of his leadership team took bold action.
Normally the mindset after the passage of such landmark legislation would be to leave good enough alone and send the proposal to the other side of the Mississippi Capitol for Senate consideration.
Instead, House Ways and Means Chair Trey Lamar, R-Senatobia, asked that the vote on the bill be reconsidered. What’s the deal? The speaker and his team won a big victory. Why would they want to call the bill up for further consideration, giving people who voted for it the day before an opportunity to change their mind and vote against it?
“I have some good news,” Lamar told the members. He said after further study it was determined that the state could afford to reduce the tax on car tags by 50% instead of the 35% in the original bill.
When the bill was first considered in the 122-member House, 12 members (all Democrats) voted against the proposal. On the second consideration after the good news about the car tags was added to the bill, only four members (all Democrats) voted no.
“It is hard to vote against the car tag reduction,” said Rep. Bryant Clark, D-Pickens, who voted for the proposal both times but has opposed past tax cut efforts offered by Republicans.
“In Washington County, the biggest complaint we get is on the costs of car tags,” said Rep. John Hines, D-Greenville, another Democrat who voted for the proposal twice, though he has opposed past tax cut plans.
The cold hard truth is that legislative Republicans can pass tax cuts (requiring a 60% supermajority) without the help of Democrats. But some wondered after the vote on the tax cut last week why the Democrats did not at least put up a fight.
In the past Democrats have opposed efforts to phase out the income tax as Gunn’s proposal would do because it also increased the sales tax. The sales tax is generally viewed as a regressive tax that places more of a burden on the poor.
The proposal put forth this year by Gunn increases the sales tax on retail items from 7% to 8.5%, making it more palatable to many Democrats than the proposal he unsuccessfully offered last year that increased the sales taxes to 9.5%. Both this year and last year, Gunn’s proposal also has included the popular-among-Democrats proposal to reduce the sales tax on groceries. This year’s proposal reduces the sales tax on groceries from 7% to ultimately 4%.
But the big change this year that caught the attention of Democrats is the reduction in the car tag tax, which is notoriously high in Mississippi.
The other major objection to tax cuts has been that the state has too many needs to be reducing taxes.
That argument might carry less weight with legislators as the state maintains a potential surplus of more than $2 billion because of unprecedented revenue growth for the past fiscal year of 15.9%, followed by anticipated double-digit growth for the current year.
The growth is not unique to Mississippi. Most states are experiencing strong revenue growth thanks to an unprecedented infusion of federal funds into states to deal with the COVID-19 pandemic, strong wage growth by workers and inflation. Because of inflation, people are paying more for products, resulting in higher sales taxes being collected by the state.
“Before lawmakers commit to expanding public programs, raising salaries, cutting taxes, or other new costs, they should consider the long-term implications of these decisions,” the well-respected Pew Charitable Trust pointed out in a recent release. “State coffers may be full now, but this will not always be the case — and states face a wide range of challenges including rising costs, narrowing revenue streams, and emerging risks from issues like advanced technologies and aging populations “
Of course, Mississippi still has issues like underfunded schools, a lack of health care access and low pay for state employees. Many believe the state Legislature should be doing more to financially shore up the Public Employees Retirement System, which is legally committed to providing pension benefits to state employees, teachers and local governmental employees.
Despite those needs and thanks to that revenue surplus, Gunn, Gov. Tate Reeves and Lt. Gov. Delbert Hosemann all have voiced support for tax cuts of varying degrees.
Perhaps as legislators ponder those tax cut proposals, they will consider the impact such action will have on the ability of the state to meet its long-term needs.
But if they still go forward with tax cuts, it is difficult to envision part of the package not being a reduction in the cost of car tags.