Income tax phase-out debated in long-poor Mississippi – Reuters

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Mississippi has a history of being first in the worst: it’s one of the poorest and unhealthiest states in the country, with chronically underfunded public schools. Some Republican leaders say a good way to increase the fortunes of the state would be to phase out its income tax.

“There’s no downside to putting money back in the pockets of Mississippians,” said Republican House Speaker Philip Gunn, one of the main sponsors of a tax cut bill introduced in the Legislative Assembly.

Opponents say cutting income tax is a terrible idea because it would mean even less money for schools, health care, roads and other services, especially for poor residents and working class. Mississippi’s income tax accounts for 34% of state revenue.

Wealthy people would see the biggest financial boost from the elimination of income tax, because they are the ones paying the most now.

Democratic state senator Hob Bryan said people choose where to live not because of tax policy, but because of family ties and quality of life. He said people live in New York, where taxes are high, for example, because the city offers opportunity.

“The idea that if the people of Manhattan only found out that Mississippi had no income tax, they would all get on a bus to Mississippi and move here – that’s just laughable on the face of it,” said Bryan said.

Mississippi’s population has shrunk over the past decade, even as other Sun Belt states are teeming with new residents. The tax cut proposals are a direct effort to compete with states that don’t tax income, including Texas, Florida and Tennessee — places where many young Mississippians are moving for bigger paychecks.

Married couple Les and Amanda Jordan live near the town of Summit in southern Mississippi. He is a retired public school administrator and she is a retired nurse practitioner. Both worked for the state. Amanda Jordan said tax rates could influence young people’s decisions about where to live. The couple have a grandson in Texas, one of the states with no income tax.
Les Jordan said he was torn.

“First time I hear about it – oh great, we would have more money,” he said. “On the other hand, we’re such a bad state. How would this affect those less fortunate?

A single person with no dependents in Mississippi currently pays no tax on the first $12,300 of income, and due to tax cuts approved years ago, the non-taxable amount will increase to $13,300 after that. year. The state has a 4% tax on the next $5,000 of income and a 5% tax on all income above that.

According to the National Conference of State Legislatures, nine states have no income tax and one, New Hampshire, only taxes interest and dividends. Opponents of Mississippi’s income tax repeal point to Republican-led Kansas, which enacted major tax cuts in 2012 and 2013 but repealed many in 2017 after running deficits large and persistent budgets.

Republican Mississippi Governor Tate Reeves wholeheartedly supports the elimination of the income tax.

“We can lay down the welcome rug for dreamers and visionaries,” Reeves said. “We can move more money through our economy. And that can lead to more wealth for all Mississippians.

Republicans control the Mississippi House and Senate by wide margins, but the elimination of the income tax is not guaranteed. A proposal died in 2021 due to fears from Senate leaders that it would hurt funding for schools and other services.

“People expect us to educate our children. This is the future of Mississippi,” said Republican Lt. Governor Delbert Hosemann, who chairs the Senate, where he and other leaders are proposing a separate plan that would cut income tax but not eliminate it. .

Both the House and Senate are proposing a reduction in Mississippi’s 7% sales tax on groceries. The House would raise sales tax on most non-grocery items from 7% to 8.5%, while the Senate would leave the rate unchanged.

The sales tax increase would have a disproportionate impact on low-income people. Poorer residents would see no benefit in eliminating income tax because they are not paying it now.

According to the Mississippi Department of Revenue, people with incomes of at least $100,000 a year make up 14% of those who pay state income tax, and their payments bring in 56% of state revenue. ‘income tax. The department says people with incomes under $30,000 make up 49% of those who pay Mississippi income tax, and their payments bring in 5% of tax revenue.

Mississippi is plagued by a history of racism that still manifests itself in the disparities between prosperous and struggling school districts.

Lawmakers are systematically cutting the state’s school funding formula by hundreds of millions of dollars a year.

LaShauna Fortenberry, a former public school teacher, said eliminating state income tax and increasing sales tax are bad ideas.

Fortenberry, who is black, said schools already had aging buildings and textbooks. She said a brother who is 18 years younger than her uses one of the same textbooks she had. How does she know? His signature appears inside.

Fortenberry now works for an agency that provides home care for the elderly in Columbia, Mississippi. She said that while teaching from 2005 to 2013, she regularly used her own money to buy school supplies “trying to make sure the children had everything they needed to be able to learn”. She said teachers always do.

“We need more money, if anything, in schools,” Fortenberry said.

Grover Norquist is president of Americans For Tax Reform, a Washington-based group that calls many tax people “socialist.” He said states that reduce tax rates experience economic growth.

“Pretty soon, no one will be more than a hop, skip, and hop away from a state with no income taxes,” Norquist told Mississippi lawmakers at a hearing. “The question for Mississippi and for every other state is, are you going to be an early adapter or are you going to be there after, to catch up?”

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