House officials revealed an extensive tax reduction initiative on Friday, aiming to ultimately eliminate the state income tax while reducing grocery taxes, raising local sales taxes, and reinforcing funding for state and local infrastructure projects. The proposed changes would eventually divert over $1 billion from the state’s current revenues.
House Speaker Jason White emphasized the intention to bolster Mississippi’s appeal and support its workforce through this initiative. He stated through social media, “We will Build Up Mississippi by eliminating the income tax to further our state’s competitive advantage and award our workforce,” alongside plans to decrease the grocery tax by half to alleviate financial burdens on residents.
This long-standing priority for House Republican leaders proposes to cut the current income tax rate from 4% to 3% in the first year, followed by a gradual reduction of 0.3% annually until it is completely phased out within a decade. Additionally, the sales tax on groceries would decrease from the current 7% to 2.5% over the same timeline. Presently, the 7% grocery sales tax is distributed between state revenue and the municipalities where it is collected. To compensate for this shift, the plan would end the state’s 18.5% sales tax diversion to local governments, ensuring that the total sales tax generated will contribute solely to the state budget.
To maintain municipal funding, the proposal includes a general local sales tax of 1.5% that cities and counties can opt out of through local votes. Moreover, a new gasoline sales tax of 5% is slated to support the budget for the Mississippi Department of Transportation, anticipated to yield approximately $400 million each year. Currently, gasoline in Mississippi is subject to a flat tax of 18.4 cents per gallon, and transportation officials have advocated for indexing the tax to align it with gasoline price fluctuations for better revenue generation for road maintenance.
A recent evaluation from the State Economist’s office examined Mississippi’s tax structure, although it did not specifically assess this current proposal. It highlighted the volatility and growth potential of income taxes relative to sales taxes, which are more stable because they correlate directly with consumer spending but possess limited growth prospects.
The report pointed out that Mississippi is shifting toward a consumption-oriented tax framework. This shift predominantly affects lower-income individuals who typically allocate a larger portion of their income towards taxable goods and services. For instance, if both an individual earning $5,000 and another making $10,000 spend $1,000 on taxable items, they would both owe $70 in sales tax. However, the lower earner effectively pays a larger fraction of their income—1.4%—compared to 0.7% for the higher earners, illustrating a regressive taxation characteristic.
Initially, the proposed legislation will go before the House Ways and Means Committee, chaired by Republican Representative Trey Lamar from Senatobia. Lamar has been a strong advocate for eliminating income tax and described the tax cut proposal as potentially one of the most transformative legislative measures seen in the state. Although no committee meeting has been arranged, House Speaker White stated that the bill will be a priority during the early stages of the 2025 legislative session.
House Democratic leader Robert Johnson III has expressed a willingness to consider the proposed legislation but noted the pressing needs in his district that still require action from the state government regarding tax revenues. “I know I have needs in my district that have yet to be met that the state hasn’t answered or said we don’t have the money for,” Johnson remarked.
If the bill successfully advances through the full House, it will likely proceed to the Senate Finance Committee, overseen by Republican Senator Josh Harkins from Flowood, who has yet to review the House’s tax reduction package. He also plans to present a tax cut initiative for consideration from his committee in the upcoming weeks.
In the event of legislative agreement on a tax cut strategy, the proposal would reach Republican Governor Tate Reeves’ desk. It remains uncertain where the governor stands regarding the latest tax cut initiative. During a recent press conference, Reeves reiterated his commitment to abolishing the income tax while generally supporting diverse tax reductions. However, he has previously opposed tax cut plans that would impose increases on other taxes, labeling them as “tax swaps.” Although the House’s plan overall indicates a net tax reduction, it includes new local sales taxes and a gasoline tax, prompting Reeves to describe the proposal as “serious” while thanking White and Lamar for their efforts towards eliminating the income tax.
