House leaders on Friday unveiled a sweeping tax cut proposal that would eventually abolish the state income tax, slash taxes on groceries, increase local sales taxes and shore up funds for state and local road work.
The plan would over time take more than $1 billion from current revenue.
“We will Build Up Mississippi by eliminating the income tax to further our state’s competitive advantage and award our workforce,” House Speaker Jason White wrote on social media. “We will build up Mississippi by cutting the grocery tax in half to boost the pocketbook of Mississippians.”
Long a priority for House Republican leaders, the legislation would reduce the income tax rate from 4% to 3% this year. Then, it would reduce the rate by .3% each additional year until the tax is eliminated in 10 years.
The plan also trims the 7% sales tax on groceries to 2.5% over time. Under current law, Mississippi’s 7% sales tax is split between the state and municipalities where the tax is collected. To shore up the loss, the legislation would end the state’s 18.5% sales tax diversion to municipalities, meaning the full sales tax collected will go to the state budget.
To make municipalities whole, the bill adds a general 1.5% local sales tax for both municipalities and counties that the local governments can vote to opt out of.
The legislation also adds a new 5% tax on gasoline sales, which would go toward the Mississippi Department of Transportation’s budget for road and bridge infrastructure. The tax is expected to generate $400 million a year. Currently, Mississippi has an 18.4 cents-a-gallon flat tax on gasoline — a flat rate no matter the cost of a gallon. Transportation leaders have for years said they need an indexed tax that would rise with the cost of gasoline in order to generate enough money to keep up road maintenance.
The office of the State Economist recently published a report analyzing Mississippi’s tax structure, though it didn’t specifically look at the House’s latest tax cut proposal.
It noted that Income taxes are subject to more fluctuation in the economy, but they have more potential for growth. Sales taxes, according to the report, are more stable because they’re directly linked to consumer spending, but they have only limited potential for growth.
The report concluded that Mississippi is transitioning to a more consumption-based tax structure. The report noted that consumption-based taxes primarily impact low-income earners the most because poorer people spend more of their overall income on goods and services.
As an example, the report illustrated that one person who makes $5,000 and another person who makes $10,000 spend $1,000 on goods that are subject to the same sales tax. Both of these individuals will pay $70 in taxes.
“In this example, the first individual pays an average of 1.4% of his or her income in sales taxes, while the second individual pays an average of 0.7% of his or her income in sales taxes—thus meeting the definition of a regressive tax,” the report reads.
The bill will first go toward the House Ways and Means Committee for consideration, which is led by Republican Rep. Trey Lamar of Senatobia. Lamar, its primary author. Lamar, a champion of income tax elimination, wrote on social media that the tax cut bill was one of “the most transformational pieces of legislation” the state has ever seen.
Lamar had not scheduled a committee meeting, but Speaker White has said the House would consider the bill early on in the 2025 session.
Robert Johnson III, the House Democratic leader, said he is keeping an open mind about the legislation and still reading over it, but he believes Mississippi still has a lot of needs that government leaders need to address with tax revenue.
“I know I have needs in my district that have yet to be met that the state hasn’t answered or said we don’t have the money for,” Johnson said.
If the bill passes the full House, it would likely head to the Senate Finance Committee for consideration, which is led by Republican Sen. Josh Harkins of Flowood.
Harkins told Mississippi Today that he had not yet reviewed the House’s tax cut package and had no response to it. He also plans to advance a Senate tax cut package out of his committee in the coming weeks.
If the Legislature compromises on a tax cut plan, it would head to Republican Gov. Tate Reeves for consideration. It’s unclear if the governor supports the House’s latest tax cut proposal.
Reeves at a Wednesday press conference reiterated that his main priority is eliminating the income tax, but he is generally supportive of all tax cuts.
However, the governor said he does not support tax cut plans that increase another type of tax and has in the past opposed any “tax swaps.”
While the House’s latest plan is an overall net tax reduction, it still adds a new local sales tax and adds a new 5% tax on gasoline. Reeves on Monday morning thanked White and Lamar for wanting to eliminate the income tax, but only said their latest plan was “serious.”
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