Governor wants more tax cuts even as two past cuts are being phased in

Two past tax cuts – both labeled the largest in state history when they were passed – are being phased in even as Gov. Tate Reeves pushes a new, massive tax cut that would dwarf them.

Reeves, coming off his November reelection, has called for lawmakers during the 2024 legislative session to completely eliminate the state personal income tax, which generated a little less than one-third of state general fund revenue over the last fiscal year.

In 2022, the Legislature voted to phase in an estimated $525 million cut to the income tax. That cut came on the heels of 2016 when the Legislature passed a bill to phase in an estimated $415 million cut in business taxes with a smaller cut to the personal income tax.

Both the 2022 tax cut and the business portion of the 2016 tax cut are still being phased in.

The phase in of the 2022 income tax cut began in January.

“We have tax cuts on top of tax cuts,” Lt. Gov. Delbert Hosemann said recently.

State Economist Corey Miller recently told legislative leaders the beginning of the phase-in of the 2022 tax cut is the primary reason income tax revenue has been down this year.

Miller pointed out revenue from income tax is down 12.1% during the first four months of the fiscal year that began on July 1. And revenue from the income tax also is down for the calendar year.

But Miller pointed out that the slowdown in income tax collections actually began in calendar year 2022. He attributed that to the fact that personal income in Mississippi declined by 0.8% in 2022.

That decline, Miller surmised, was a result of the end of federal payments related to the COVID-19 pandemic.

“My point is there are likely factors responsible for the lower individual income tax revenues we have observed in addition to the tax cut that began in January,” Miller recently told legislative leaders during a hearing of the Joint Legislative Budget Committee.

Hosemann has said that most likely tax cuts will be considered during the 2024 session. But he has indicated that tax cuts other than the elimination of the income tax also might be on the table. He recently said the elimination of the 7% sales tax on groceries – the highest of its kind in the nation – also should be on the table.

Last year the personal income tax generated $2.38 billion in revenue. It is estimated the 7% tax on food generates about $325 million annually.

State Sen. Daniel Sparks, R-Belmont, said recently on Mississippi Today’s “The Other Side” podcast that an in-depth study should be conducted before any additional tax cuts are passed.

“I am interested in more tax relief. I want people to keep their money,” Sparks said. “I want them to be able to spend it, invest it. I do think it is a draw to the state. But I also recognize there is a certain amount of money that it takes to operate government.

“And one of the always great discussions is what are core function of government and what does it take to operate them. And you have to collect it somewhere.”

Sparks said it must be determined:

• What is the impact on revenue of the past tax cuts that are still being phased in.

• How much the billions in federal COVID-19 relief pumped into Mississippi have boosted revenue collections.

• How much has inflation helped increase the sale tax collected on retail items.

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