A clarion call by Gov. Tate Reeves, Speaker Philip Gunn and many other Republicans is that Mississippi should emulate Tennessee and eliminate the income tax.
But for at least a brief time, the Tennessee Legislature, exalted in the past by Reeves and Gunn for its position on taxes, has enacted tax policy that often has been opposed by many Mississippi Republicans.
For the entire month of August, Tennessee lawmakers eliminated the state’s 4% tax on groceries. Various groups in Mississippi have advocated unsuccessfully for permanently cutting or eliminating the state’s 7% tax on food, which is the highest statewide tax of its kind in the poorest state in the nation.
Mississippi has its own version a sales tax holiday. Mississippians recently got to experience the so-called 2nd Amendment sales tax holiday enacted in 2014 by the Legislature, where the normally 7% levy on guns and other hunting items is lifted for a weekend.
Just to be clear, the Tennessee Legislature eliminated the sales tax on food for a month while the Mississippi Legislature lifted the tax on guns for a weekend.
There has been no holiday or respite in Mississippi from the 7% tax on groceries.
Mississippi does provide on a weekend in July a sales tax holiday on back-to-school items, including clothing and supplies. The sales tax holiday on back-to-school items was an effort, supporters said when it passed in 2009, to provide financial relief to low-wage earners.
But multiple studies by both liberal and conservative groups have called the so-called sales tax holidays bad tax policy. The conservative Tax Foundation found that sales tax holidays “do not promote economic growth or significantly increase consumer purchases.” And various studies have found the holidays do not help the poor because they generally do not have the financial wherewithal to make larger purchases to take advantage of the time-restricted tax break. They are forced to spread out their purchases over an extended period because of their limited income.
“Low-income consumers may be less able to shift their purchases to coincide with the holiday, and some, such as the elderly, might have needs other than the goods offered. Overall, opponents say, sales tax holidays simply shift the timing of consumer purchases,” according to a report by the National Conference of State Legislatures.
Tennessee’s month-long sales tax holiday on food purchases is a bit different than the average sales tax holiday because of its unusual length and because it provides tax relief on items that everyone must have. Everybody has to have food.
The exemption of the 4% tax on groceries was the Tennessee Legislature’s effort to provide widespread relief in 2022 to offset high inflation. Many states are taking a portion of what is in many cases unprecedented surpluses to provide some sort of rebate (usually direct cash payments) to residents below a certain income level to offset the high inflation. States as diverse as California, Indiana and New Mexico are among the about 20 states providing rebates.
Tennessee opted to do it by enacting the sales tax holiday on food for a month instead of providing the cash rebate.
The Mississippi Legislature, despite a record surplus and unprecedented tax collections, opted not to provide any rebates or short-term tax relief during calendar year 2022. The Legislature did enact a record $500 million tax cut, but it does not begin until January and will be phased in over multiple years. For many Mississippians, they will not receive the benefit of the tax cut until they file their 2022 state income taxes in 2023.
Multi-year efforts to reduce or eliminate the sales tax on food in Mississippi have been unsuccessful. Multiple studies have found that lower income people in Mississippi pay a larger percentage of their income on taxes than do higher wage earners because of the state’s high sales tax, particularly the tax on food. Poor people have to spend a higher percentage of their income to buy a gallon of milk or a loaf of bread than do the wealthy.
A 2021 study by One Voice and the Institute of Taxation and Economic Policy found that the bottom 80% of Mississippians — earning less than $77,500 annually — pay a greater percentage of their income in state and local taxes than do those in the top 20%.
Mississippi had a low income tax rate even before the Legislature during the 2022 session opted to further cut the income tax. On the other hand, Mississippi has one of the highest statewide sales tax rates in the nation and the highest rate on food.
In addition to the sales tax holiday on food, Tennessee also currently has a year-long sales tax holiday on the purchases of gun safes and other gun safety items. Mississippi’s 2nd Amendment sales tax holiday does not cover such safety items.