Mississippi Gov. Tate Reeves promised to push for a full elimination of the state’s income tax during the 2023 Legislative Session. The move would make Mississippi the 10th state with no income tax.
Addressing a crowd of business leaders Thursday at an event hosted by the state Chamber of Commerce, Reeves touted “the largest tax cut in Mississippi history during the 2022 Session” and said he wanted to go even further.
“Last Session the fiscal and the financial environment was right to do exactly that, but unfortunately, the political environment was not,” Reeves said. “This session I hope that’s not the case.”
Mississippi’s Republican-controlled legislature passed legislation in 2022 that will eliminate the state’s 4% income tax bracket starting in 2023. In the following three years, the 5% bracket will be reduced to 4%.
Nine states don’t have an income tax and one more, New Hampshire, only taxes interest and dividends, according to the National Conference of State Legislatures. Washington state passed a capital gains tax on high earners in 2021 that is facing a legal challenge.
Supporters of the 2022 Mississippi tax cut said it would spur economic growth and attract new residents to Mississippi. Opponents said reducing the income tax would mean less money for schools, health care, roads and other services, especially hurting Mississippi’s poor and working-class residents.
The Mississippi income tax accounts for 34% of state revenue. Lawmakers said the tax cut would reduce state revenue by $185 million in the first year. By the final year, the figure would be $525 million.
Republican House speaker Philip Gunn has said full elimination of the state income tax is “achievable,” though he hasn’t committed to doing so in the 2023 session. Lt. Gov. Delbert Hosemann, also a Republican, has not expressed support for fully eliminating the income tax. Hosemann presides over the state Senate.
Reeves said tax incentives have been supplanted by workforce concerns for companies making decisions about where to locate. “It’s all about, can I hire enough people to get my product to market,” he said.
Mississippi’s population has dwindled in the past decade, even as other Sun Belt states are bustling with new residents. Tax-cut proposals are a direct effort to compete with states that don’t tax earnings, including Texas, Florida and Tennessee.
“You don’t have to be a geography expert to look at a map and recognize that we have Texas to our west, Florida to our east and Tennessee to the north,” Reeves said. “All three of those states have no income tax, and therefore all three of those states have a competitive advantage when we are recruiting for both businesses and individual talent.”
Democratic state Sen. Hob Bryan said the idea that people choose where to live based on tax policy is “laughable on its face.”
“Do I need to say that again? It’s laughable on its face,” Bryan told The Associated Press Thursday.
“The legislation passed last year was the most disastrous piece of legislation we’ve passed in the 40 years that I’ve been (at the legislature),” Bryan said. “The state of Mississippi desperately needs water, sewer and roads. We cannot give away one-third of the state’s revenue and have enough money to provide basic services.”
Many business interests have not taken a strong stance on income tax elimination in Mississippi. In a 2022 report detailing the concerns of business leaders in the state, the Mississippi Economic Council wrote that “the Mississippi tax environment was not high profile nor ever discussed significantly as a priority.”
Bryan said the primary factor stopping capital from flowing to Mississippi are the “hospitals all around the state teetering on the verge of closing.”
“People are not going to move to a place where there’s no health care,” Bryan said.
The 2023 Legislative Session starts in January.
Republished with permission from The Associated Press.