The Senate approved a significant tax reduction bill on Monday evening, aiming to lessen state income taxes and reduce the sales tax on groceries while also increasing the gasoline tax. This legislation sets the stage for discussions with the House, which has its proposal focused on eventually eliminating the individual income tax. The Senate’s decision, concluding with a 34-15 vote, saw support from a blend of four Democrats and opposition from four Republicans. As it stands, the bill awaits examination by the House, whose agenda includes a more extensive tax restructure for removing the state income tax entirely over a longer span.
The Senate’s proposal plans a $326 million net tax reduction, contrasting with the House’s more significant $1.1 billion proposal. Over four years, the Senate suggests decreasing the state’s flat income tax rate from 4% to 2.99%, whereas the House envisions the complete abolition of the income tax over a decade. Senate Finance Chairman Josh Harkins, a Republican from Flowood, described the plan as a balanced approach to tax reduction. It aims to bolster revenue for infrastructure by modestly increasing the gasoline tax.
“We believe we’ve introduced a strong proposal which aids families by lowering grocery sales taxes,” expressed Harkins. “Additionally, it encourages and rewards hard work.” The Senate bill suggests a reduction in the state’s 7% sales tax on grocery items, which is currently the highest in the nation, down to 5% starting July 2025. This tax adjustment ensures that municipalities maintain their portion of grocery tax revenue.
Moreover, the proposed Senate bill will incrementally raise the state’s current gasoline excise tax of 18.4 cents per gallon by three cents annually over the next three years, culminating in a 27.4 cents-per-gallon gas tax. This adjustment seeks to assist the Mississippi Department of Transportation by addressing a long-standing deficiency in highway maintenance funds.
Many Democratic senators opposed the plan, worrying about the potential repercussions of effectively removing half a billion dollars annually from the budget, considering pressing state issues like public education and healthcare. “That’s significant funding we need for essential infrastructure,” highlighted Democratic Senator Hob Bryan of Amory. “Infrastructure benefits everyone.”
Attempts by some Democrats to amend the bill by removing the grocery tax or avoiding an increase in the gas tax were unsuccessful, overpowered by the GOP-dominated chamber’s party-line votes. Four Republican senators opposed the final bill, asserting that the increase in the gasoline tax contradicted the GOP’s core low-tax principles.
Republican Senator Angela Burks Hill from Picayune articulated concerns about how the gas tax hike could disproportionately impact rural residents who need to drive longer distances for work and groceries. “I’m striving to adhere to our party’s platform of maintaining low taxes,” Hill remarked.
With both the House and Senate adopting separate tax proposals, the legislative leaders now face the challenge of negotiating a consensus on a final package. House Speaker Jason White, representing the Republican stance alongside GOP Governor Tate Reeves, has emphasized the ultimate goal of abolishing the income tax this session.
White has previously expressed his willingness to work with the Senate, emphasizing the importance of a comprehensive tax cut that addresses broader issues. “We are not interested in a minimal tax cut without tackling other matters,” White commented. Governor Reeves has not been favorable to the Senate’s proposal, as it doesn’t achieve a complete elimination of the income tax. In the event of a legislative deadlock, special legislative sessions may be called to further deliberate on the tax issue.
Nevertheless, Harkins remains hopeful that consensus can be reached in the regular session. In the upcoming month, House and Senate leaders are expected to negotiate the intricacies of the proposal. Lawmakers face a deadline of March 31 to finalize tax and appropriations-related bills.