A massive tax overhaul in Mississippi has cleared the statehouse and is on its way to the governor’s desk. Transportation funding is one part of the plan.
House lawmakers voted 92-27 to approve Senate changes to a 181-page bill to cut certain taxes and add tax revenue and other funds elsewhere in the state budget. The Senate approved the bill, HB1, on a 32-16 vote.
Income tax collection
At the urging of Gov. Tate Reeves, the main component of the bill would gradually eliminate the state’s individual income tax.
Both chambers agreed to trim the 4.4% income tax rate by one-quarter percent annually until 2030. At that time, the rate will reach 3%.
Trimming the income tax to 3% is estimated to result in a $400 million revenue loss for the state.
Further tax rate deductions will be determined by the difference between the state’s revenue and expenses. Reductions will continue until the tax is completely eliminated.
VERY IMPORTANT update:
Speaker @JasonWhiteMS, @tlamar44, and the Mississippi House just tabled the Motion to Reconsider on HB1!
What does this mean?
The bill is headed to my desk.
NOW I have 2 options:Option 1: Sign HB1 and end the tax on work!
Option 2: Veto the…
— Governor Tate Reeves (@tatereeves) March 21, 2025
Fuel tax increase
Mississippi has an 18-cent fuel excise tax. The flat tax is unchanged for nearly four decades.
The bill sent to the governor would increase the tax on gas and diesel purchases by nine cents per gallon over multiple years.
A three-cent rate increase would kick in July 1, 2025. Additional increases would be implemented each July through 2027. At that time, the fuel tax rate would reach 27 cents.
The introduced version of HB1 called for adding a 5% sales tax to state gas and diesel purchases. The new tax would have increased the tax rate by an estimated 13 cents.
The Mississippi Department of Transportation will receive the bulk of the additional fuel tax revenue – 74%.
The State Aid Road Fund will get 23.25% of tax revenue with the state’s multi-modal fund getting the rest.
The final version of the bill also includes a provision to adjust the fuel tax rates every other year based on the percentage change in the yearly average of the National Highway Construction Cost Index.
The adjustments would begin in 2019. The maximum increase at one time could be one penny.
Sales tax revision
Mississippi collects a 7% sales tax. Revenue is split between the state and municipalities.
HB1 would phase down the state sales tax on groceries from 7% to 5%. The introduced version of the bill called for trimming the tax to 2.5%.
The sales tax structure on other items would be adjusted to help offset the costs.
Lt. Gov. Delbert Hosemann said the bill passage provides “transformative tax relief” for Mississippians.
“After countless hours, we have reformed our tax structure to reward hard work, reduced the burden on grocery costs, fostered economic prosperity through stronger infrastructure, and initiated the long-term solvency of our retirement system for generations to come,” Hosemann said in prepared remarks.
Critics said the state cannot afford to reduce the budget and still provide to residents needed services. LL
More Land Line coverage of Mississippi news is available.
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