Mississippi House, Senate agree to income tax package, save taxpayers estimated $525M

(The Center Square) – Mississippi will have an income tax for the foreseeable future.

On Sunday, the House and Senate adopted House Bill 531 to establish the Mississippi Tax Freedom Act. The House passed the bill by a 93-23 vote and the Senate ratified the bill with a 39-10 vote. Each chamber is majority Republican.

Introduced in January by the House, the bill proposed eliminating the income tax through raising taxpayer exemptions on earned income. The Senate countered with its own bill that would have eliminated the income tax for those earning up to $10,000 and would scale down the income tax from 4% to zero over a four-year period.

After the weekend’s conference committee, the chambers agreed to scale back the income tax but not eliminate it. For tax year 2021, the first $4,000 of earned income would not be taxed and the next $1,000 is taxable at a rate of 3%. For 2022, the first $5,000 of income tax is not taxed; income ranging between $5,000 to $10,000 would be taxed at 5%.

Beginning in 2023, no tax will be levied on taxable income from $5,000 to $10,000 and beginning in 2024 taxable income above $10,000 will be taxed at 4.7%. The next year the tax would be lowered to 4.4% and 4% in 2026.

According to the bill, the legislature will take a second look at the tax rates in 2026 and decide if there is a desire to continue decreasing the income tax.

Republican Gov. Tate Reeves said in a Facebook post the tax cuts would be more than $500 million.

“I still believe we can and should eliminate the income tax,” the governor said. “The fiscal environmental is right. Sadly, the political environment in the (Mississippi) Senate is not. Strong action that will change our state for the better takes time and passionate partners. For transformative change, we need our state’s lieutenant governor to work with bold conservatives.

“This is a good step. It is a win at the beginning of this fight. This is not the end.”

Phil Gunn, speaker of the House, said in a tweet the plan would send $525 million “back to the people who earned it.”

Today the House and Senate both passed HB531, the Mississippi Tax Freedom Act, with strong bipartisan votes. This tax plan will give $525 Million back to the people who earned it. This is not the end of our efforts to eliminate the tax on work – it is a bold beginning. 1/4— Philip Gunn (@PhilipGunnMS) March 27, 2022

“This is not the end of our efforts to eliminate the tax on work – it is a bold beginning,” Gunn said. “This tax cut will make Mississippi one of the most work-friendly states in the nation and marks a clear path to the continued elimination of the income tax.”

The tax cuts, Russ Latino, president of Empower Mississippi said, are the biggest in state history.

“It’s good, responsible, conservative policy,” Latino said. “Eliminating the current 4% bracket will provide immediate relief to working families. Creating a simple, lower flat tax will make us more competitive across the region and put money back into the pockets of the people who earned it. We’re hopeful the legislature will seize upon this historic agreement.”

Doug Carswell, president and chief executive officer of the Mississippi Center Public Policy, said the tax cut was “great news.”

“It is good that some of our state’s $1.2 billion surplus is being used to give taxpayers back some of their own money,” Carswell said. “However, this package is more modest than we would like to have seen. This is a good first step but it is not full income tax elimination. Under this proposal, in 2026 the legislature will still need to agree to further reductions.

“There is a danger that the Mississippi government will not tax to get the money it needs, but finds a need for the money it gets.”

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