Legislators propose tax suspensions for income, gasoline

Published 7:00 pm Thursday, March 24, 2022

Taxes seem to be on legislators’ minds these days. While one senator doesn’t see a need for tax-paying Mississippians to keep more of their own money through tax breaks, others want at least temporary cuts and still others want some taxes gone, period. 

Speaker Philip Gunn remains firm in wanting to do away with the state income tax. “It is a good thing to let citizens keep more of their hard-earned money,” he said. The Senate seemed to agree – somewhat – by passing its latest proposal to reduce but not entirely eliminate it. The Senate plan would reduce the top income tax rate from 5 percent to 4.6 percent.  

While Gunn wants to phase out the state income tax, Lt. Gov. Delbert Hosemann wants to simply reduce it, saying it’s too risky and they should focus more on smaller tax cuts and rebates instead. House leaders say the Senate plan is but a half attempt to bring relief to millions of tax payers. Senate leaders say the House is being rash attempting to eliminate a third of state revenue.

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Gunn, talking with the media Wednesday, criticized proposals made by the Senate to reform the state’s income tax, saying “under their plan, you get four bucks back per month in the first year. That’s not transformative,” especially for the very people who earn the money that funds programs for others. He further said that the House’s plan “transforms the lives of Mississippians [by putting] … real dollars back in the pockets of the taxpayers.”

Some pundits criticize removing the state’s income tax because the poor don’t benefit from the measure — only those who actually pay taxes do. 

The Senate has not presented a plan that would call for a complete elimination of the state’s income tax, instead seeking to phase out some income tax brackets and to decrease the grocery tax. 

The Senate plan also has a six-month suspension of the state’s 18.4-cents-per-gallon gasoline tax. 

“The No. 1 concern citizens are discussing around their kitchen tables is the increased cost of goods and services,” Hosemann said March 21 in a press release. “Reducing what Mississippians are paying at the pump is direct and immediate relief to families,” he added, calling for a six-month suspension of the state’s 18.4-cent gas tax to combat record-level inflation.

Mississippi’s tax rate is 18 cents a gallon for all motor fuel, including gasoline, plus .4 cents for environmental protection, for an overall rate of 18.4 cents per gallon.​​

Suspending the gas tax for six months would cost about $215 million. Entities that receive a diversion currently from the gas tax would be made whole through the Capital Expense Fund (additional revenue) under Hosemann’s proposal.

The Senate passed legislation earlier that would provide a boost of $300 million to the state’s Emergency Road and Bridge Repair (ERBR) Program. Hosemann’s gas tax suspension proposal would not impact this additional benefit of one-time funds for critical infrastructure projects. 

Mississippi’s income tax generates 34 percent of state revenue. Critics say the state still has significant financial obligations to improve its mental health and foster care systems and that the measure doesn’t help the poorest Mississippi residents, who would see no gain from eliminating the income tax because they don’t pay any.

The House’s plan, like the Senate plan, would reduce the 7 percent sales tax on groceries, but very slowly. It would also include one-time income tax rebates of $100 to $1,000. The House’s plan would lower the state’s income tax in steps and over multiple years.

Though COVID-19 funds are now financing many Mississippi infrastructure projects, Democratic Sen. Hob Bryan said to Mississippi Today that the state should invest in schools, roads, water and sewer systems and other projects that will “improve the quality of life,” adding “I disagree with the notion that we need a tax cut at all.”

Brookohaven Republican Sen. Jason Barrett of the 39th District disagrees vehemently. “The No. 1 concern I hear constituents talking about is inflation,” he said Wednesday. “Suspending the gas tax, reducing the grocery tax and lowering the income tax all provide direct and immediate relief to citizens from overwhelming inflation without breaking the budget. 

“The Senate’s proposals would provide the largest tax cut in Mississippi history, while leaving room to address the state’s other critical needs in infrastructure, education, health care and job creation. 

“We need a tax cut without crippling core government services. We can achieve that goal by being fiscally conservative.”