By Bobby Harrison
Daily Journal Jackson Bureau
JACKSON – No politician talked much about tax cuts during his or her official speech late last month at the Neshoba County Fair.
But perhaps the biggest news that came out of the event is that a tax cut will be seriously considered during the 2015 legislative session – an election year.
On the first day of Neshoba speeches, Lt. Gov. Tate Reeves, answering questions from the media after he finished his talk, said he is studying possible tax cuts proposals for the 2015 session.
“We think it is time to look at a pay raise for taxpayers,” said Reeves.
Only minutes after the words left Reeves’ mouth, Gov. Phil Bryant’s staff was emailing to reporters a letter he sent to Reeves and Speaker Philip Gunn earlier in the summer.
“I believe it is time for us to provide significant tax relief to our citizens,” the governor wrote to fellow Republicans Reeves and Gunn. “While our tax rate is comparatively low, it still has meaningful impact on working Mississippians.
“For the past several months, I have been working with my staff and other officials on developing meaningful reform proposals.”
Various sources support Bryant’s claim that Mississippi has a “comparatively low” tax rate. A study by USA Today for 2010 finds the average American paid 9.9 percent of his or her income in state and local taxes. The average Mississippian, according to the USA study, paid 8.4 percent, ranking the state in the top 15 in terms of lowest tax rates.
A similar study by WalletHub, a social media company that does a litany of state rankings on various issues, found similar results.
While Mississippi, based on various studies, has a low tax rate, it is not because of actions of modern-day politicians. The tax rate has been low for a long time.
In recent years, the Legislature and the governor have provided a lot of targeted tax breaks to industry and other special interest groups.
But there has not been a broad-based tax cut that affected a large portion of the citizenry since 1997. That year the so-called marriage penalty was reduced so that a married couple did not pay more in income tax than did two single people living together.
When that tax cut was passed, Kirk Fordice was governor while Ronnie Musgrove presided as lieutenant governor in the Senate and Tim Ford served as House speaker. The proposal originated in the Senate and then-Finance Chair Hob Bryan, D-Amory, was the author of the legislation.
Passage of the legislation was significant. But Fordice, who wanted larger tax cuts, missed an opportunity to relish the passage of a proposal he championed because he was too busy complaining about tax cut proposals the Legislature did not pass.
At one time former Gov. Haley Barbour had eyed a comprehensive tax cut as the landmark achievement for his second term, but the Great Recession hit in 2008 and he spent the rest of his tenure battling budget shortfalls. There was no opportunity for a tax cut.
With state revenue again growing, it is not surprising that Republicans, who control both chambers of the Legislature and the Governor’s Mansion for the first time since the 1800s, would like the opportunity to take credit for a broad-based tax cut.
But others question how low state taxes should go when Mississippi has so many needs, such as having one of the lowest per-pupil expenditure rates and some of the worst health care outcomes in the nation.
“Tax cuts might sound good at first, but they won’t work,” said Corey Wiggins, director of the Mississippi Economic Policy Center. “To be competitive Mississippi needs better schools, a college-educated workforce, and healthier communities. Tax cuts would undermine our ability to invest in those necessities.”
Despite modest increases in K-12 education funding, largely earmarked for teacher pay raises, the state is still underfunding schools this year by more than $200 million, according to the formula in state law, topping off a cumulative shortfall of $1.5 billion since 2008.
Mississippi has by all accounts a low tax rate, but critics have argued that its taxes are regressive – that is, not geared to lower rates for the poor, which the state has the highest percentage of in the nation.
Mississippi and Alabama are the only two states that tax groceries at the same rate they tax other retail items. According to the Center on Budget and Policy Priorities, 31 states and the District of Columbia exempt take-home groceries from a sales tax while 12 other states either have a lower sales tax rate on food than on other products or offer some type of tax credits for food purchases.
Mississippi’s tax rate on most retail items, including groceries, is 7 percent. Alabama has a state rate of 4 percent, but local governments can tack on an additional 6 percent. Groceries are not exempt from that tax.
Former Lt. Gov. Amy Tuck tried first to eliminate and then to reduce Mississippi’s sales tax on groceries, saying it was not fair to ask the poor to pay a tax on their groceries. Tuck wanted to offset that lost revenue by increasing the tax on cigarettes. But then-Gov. Barbour blocked the effort.
He argued that the sales tax on food was fair, and that because the federal tax system was so progressive, or tilted toward the wealthy having to pay more, the states did not not have to be.
Barbour said he did not believe reducing the grocery tax would do much to grow the economy, as he believed other cuts would.