
A Mississippi House panel has advanced a tax plan that is touted to trim $2.2 billion in state income tax. The plan would also result in a significant increase in transportation funding.
The House Ways and Means Committee voted this week to approve a 107-page bill that would cut some taxes and add tax revenue and other funds elsewhere in the state budget.
Rep. Trey Lamar, R-Senatobia, is the committee chairman and bill sponsor. The main component of his bill is the elimination of the state’s individual income tax. HB1 would trim the tax annually until it is completely phased out in 10 years.
Overall, the legislation would net a $1.1 billion tax cut after accounting for the addition of $1.1 billion in other funding changes at local levels.
Lamar said his bill is “one of the most transformational pieces of legislation that Mississippi has ever seen.”
“(HB1) … lays the foundation for the superhighway of Mississippi’s future business and commerce infrastructure,” he said in prepared remarks.
Income tax cuts
Mississippi’s 4% income tax would be reduced over the next decade until it is completely removed. The action would result in $2.2 billion in tax cuts.
In 2026, the income tax would be trimmed by 1% to 3%. Each year thereafter, the tax would be reduced by 0.3% until it is eliminated.
Supporters have said economic growth would balance out the tax cuts. Critics have countered that the state’s budget may not raise enough revenue in the years ahead to offset the cuts.
Sales tax adjustments
The state sales tax on groceries would be phased down from 7% to 2.5%. The tax structure on other items would be adjusted to help offset the cuts.
Currently, Mississippi collects a 7% sales tax. Revenue is split between the state and municipalities.
HB1 would end diversions to municipalities. As a result, the full sales tax collected would be applied to the state budget.
Municipalities and counties could recover the lost revenue by adding a general 1.5% local sales tax for both. Counties would use their portion of revenue for transportation projects.
Advocates have said the new sales tax would result in an additional $80 million per year for county road and bridge work.
House Bill 1, the Build Up Mississippi Act, is one of the most transformational pieces of legislation that Mississippi has ever seen. It rewards the dignity of our people’s work by eliminating the income tax, it makes it easier to feed our families by slashing the grocery tax… pic.twitter.com/1HH6GDzUZo
— Trey Lamar (@tlamar44) January 10, 2025
Fuel tax increase
Mississippi has an 18-cent excise tax collected on fuel purchases. The flat tax has remained unchanged since the late 1980s. Only Alaska has gone longer between fuel rate increases.
The bill would add a 5% sales tax to state gas and diesel tax collection. The fuel sales tax would add $400 million to the state budget.
The sales tax collected on fuel sales would increase the tax rate by an estimated 13 cents. Revenue would be routed to the Mississippi Department of Transportation for road and bridge work.
Another bill provision would divert $80 million in gambling revenue that now goes to transportation into the state’s public employee retirement system.
House Speaker Jason White, R-West, backs the bill.
“House Bill 1 is priority (No.) 1,” White said in posted remarks. “We will build up Mississippi by eliminating the income tax to further our state’s competitive advantage and award our workforce.”
He added that “we will build up Mississippi by developing a dedicated source of revenue for our critical infrastructure with maintenance and capacity projects.”
The bill awaits consideration on the House floor. If approved there, it would move to the Senate. LL
More Land Line coverage of Mississippi news is available.
Credit: Source link