By Bobby Harrison/NEMS Daily Journal Jackson Bureau
JACKSON – Mississippi businesses will get a state income tax break on their inventory under a proposal now awaiting the signature of Gov. Phil Bryant.
The bill passed the House over the weekend and the Senate approved it 39-8 on Monday. Opponents concerned about the cost to the state general fund will have another opportunity to block it, but based on the overwhelming vote in the Senate that is unlikely.
Sen. Finance Chairman Joey Fillingane, R-Sumrall, said 41 other states do not have an inventory tax and that giving Mississippi businesses a break would stimulate economic development.
Sen. Hob Bryan, D-Amory, argued the legislation would help Walmart and other large retailers and not the manufacturers business groups have said are being hurt by the tax.
“How does it increase economic development by Walmart not paying taxes?” asked Bryan.
Business leaders have long advocated elimination of the tax they pay on inventory. But since it is levied by city and county governments, the Legislature has been reluctant to deal with the issue because a reduction might force local property tax increases to offset the lost revenue.
Under the approved proposal, local governments would still tax inventory, but businesses could a claim a credit on their state income tax to offset the tax paid to the local government. But businesses could only claim the tax credit if they have a state income tax liability.
House Ways and Means Chairman Jeff Smith, R-Columbus, said the tax credit when fully enacted in 2016 would cost the state general fund between $21 million and $30 million annually. Under the original bill as it passed the House, the hit to the general fund would have been more than $120 million annually.
Smith said he would have preferred the original House bill that would have resulted in the state writing checks to businesses to offset the amount of the local inventory tax even if the companies did not have a state income tax liability. But Smith said the Senate would not agree to that proposal.