After a lengthy debate — mostly between Republicans — that stretched back to Hoover administration economic policies, the state Senate on Wednesday passed a modest Mississippi income tax and grocery tax cut with a bipartisan vote.
Senate Bill 3164 passed 40-11 and now heads to the House, where Republican leaders want to eliminate the income tax, not just cut it, and have decried the Senate plan as a “token” cut. All Republicans voted for the Senate measure and all the votes against were Democratic, although five Democrats voted yes.
“It doesn’t blow the budget,” Senate Finance Chairman Josh Harkins, R-Flowood, told colleagues of the plan he authored. “That’s the most important thing to note with this plan. It does not use one-time money for recurring expenses … I don’t think anybody believes we are in stable economic times, with inflation at 7% … This is a good first step, a sound plan that is fiscally responsible.”
The Senate’s tax cut plan would cost about $317 million a year, plus a one-time cost of $130 million. It would:
- Phase out the 4% state income tax bracket over four years. This would mean people would pay no state income tax on their first $26,600 of income, a savings of about $50 a year.
- Reduce the state grocery tax from 7% to 5%, starting in July.
- Provide up to a 5%, one-time income tax rebate in 2022 for those who paid taxes. The rebates would range from $100 to $1,000.
- Eliminate the state fee on car tags going into the general fund, which would be about $5 off the cost of a new tag, $3.75 for renewals.
The House has passed a more sweeping tax overhaul that would eliminate state income taxes for most taxpayers in 2023 and phase it out totally within about a decade pending the economy grows enough to trip “triggers.” It would also cut the grocery tax eventually from 7% to 4%, and cut car tags in half, by using state tax dollars to subsidize local government car tag fees.
But the House plan would increase the sales tax on most retail items from 7% to 8.5%.
House Speaker Philip Gunn, who has championed elimination of the state income tax for two years, said he hopes citizens “just do the math” on how much they’ll save with the House plan compared to the Senate plan. The House leadership has distributed a flyer recently showing how taxpayers “Betty” and “Jim,” each making $40,000 a year, would make out under each plan. Betty would save $1,513 in year one under the House plan. Jim would see about $260 under the Senate plan, the flyer says.
But Lt. Gov. Delbert Hosemann and his Republican Senate leadership have said the House plan is foolhardy, eliminating a third of the state’s revenue and upending state tax structure at a time of great economic uncertainty and volatility.
Although he voted for the Senate plan, Republican Sen. Chris McDaniel of Ellisville spoke at length Wednesday on how it doesn’t go far enough and the House elimination plan is better. McDaniel got into sometimes heated debate with fellow Republicans during the floor debate as he criticized the plan as “half measures.”
“If you can find a more conservative politician than me in this state, then I’d like to see them,” McDaniel told Sen. David Parker, R-Olive Branch, during a heated exchange. “… I am not a moderate Republican … We just can’t seem to let go of a taxpayer’s dollar.”
“It’s almost like you’re Captain America or something,” Parker responded to McDaniel. “When you say all that, and when you say it again later today on your Facebook live, it’s like you’re saying all Republicans in this room are failures and you’re better than everyone else … Sometimes it’s easier to just vote ‘no’ instead of looking at something and voting the right way.”
McDaniel in a floor speech talked about former Presidents John F. Kennedy and Ronald Reagan pushing tax cuts that helped the economy.
“You went back so far that I thought you were going to go back to Hoover,” Sen. David Jordan, D-Greenwood, told McDaniel. “Herbert Hoover let the bottom fall out of everything.”
Jordan, who voted against the tax measure, said, “We haven’t even fully funded the (Mississippi Adequate Education Program) to fully educate our children, and we’re talking about cutting taxes.”
Sen. Hob Bryan, D-Amory, urged colleagues to vote “no” on any tax cuts.
“My people want roads without potholes in them,” Bryan said. “… Talk to your schools back home, talk to the parents. Do they think the schools are overfunded?
Sen. Daniel Sparks, R-Belmont, countered both Bryan’s and McDaniel’s arguments against the Senate plan.
“I respectfully disagree with them,” Sparks said. “One wants to recklessly eliminate the income tax. One says now is not the time to cut any taxes … I am a Republican and I’m a conservative. I believe this is the right time to cut taxes without being reckless.”
Both Hosemann and Gunn on Wednesday defended their plans but said there should be room for compromise. But neither offered too many specifics on where that would be.