Senate unveils income tax cut plan, signaling battle between Capitol leaders


The state Senate on Tuesday unveiled its proposal to cut the state income tax, not eliminate it altogether as the House and the governor are proposing.

It would also reduce the tax on groceries, provide a tax refund of up to $1,000 for 2022, and reduce the cost of car tags.

It also sets up a potential battle for lower taxes on Capitol Hill – with President Philip Gunn and Governor Tate Reeves pushing for the elimination of the state income tax over time, though they disagree on the details.

“This plan is simple, direct and enduring — all the things you want to address,” Lieutenant Governor Delbert Hosemann said. “It responds to inflation and the rising cost of living that hits you at the grocery store and when you fill up your gas tank, and it also responds to increases in teachers, infrastructure and care needs. of health we have.”

Gunn said Tuesday he hadn’t seen many details of the Senate plan, but said his support for eliminating, not just reducing, income taxes was strong. Gunn, the third-term president, called his plan to eliminate the income tax the most significant legislation of his political career.

“We’re not interested in a token tax cut that only returns a portion to our citizens without eliminating it,” Gunn said. “The governor made similar statements. We will soon present an analysis showing the difference between the two plans. We still believe our plan is real, conservative tax relief.

Unlike the House plan, the Senate income tax cuts would not be offset by increased sales or other taxes. Unlike the House plan, the Senate plan would not require revenue growth “triggers” for the cuts to continue.

The Senate’s $446 million tax cut proposal:

– Phase out the 4% state income tax bracket over four years. This, coupled with the elimination of the 3% tax bracket starting last year, would mean people would pay no state income tax on their first $26,600 of income. It would cost $185 million a year at the end of the four years of cuts.

– Reduce the state tax on food products from 7% to 5%, starting in July. It would cost about $118 million per year based on current revenues.

– Provide up to 5% income tax reduction in 2022 for those who have paid taxes. The rebates would range from $100 to $1,000 and would likely be paid out late this year, around November, Senate leaders said. This would represent a one-time cost of approximately $130 million.

– Eliminate state fees on car tags going into the general fund. That would be a small reduction, since most of the cost of a car tag in Mississippi is county-level taxes and other fees, which would not be eliminated. It would cost about $13 million a year.

Senate Finance Chairman Josh Harkins, R-Flowood, announced the plan to the Senate Finance Committee on Tuesday and provided a blank page with extensive details. He said the full bill will be available soon. Harkins and other Senate leaders have been working on a tax cut plan since last year, after the Senate killed Gunn’s first attempt at an income tax elimination plan.

The House has already sent its income tax elimination plan to the Senate. It includes grocery tax cuts and a 1.5 cent increase on the dollar in sales tax, which would raise the state sales tax to 8.5%. The plan would phase out state income tax over a decade, based on income growth.

The House plan has faced criticism and skepticism from business and other leaders since Gunn introduced it last year, but he and other House leaders said they changed it to address concerns. The sales tax increase has been reduced from the original version, and the plan’s other tax increases have been eliminated.

“The house plan eliminates income tax in a responsible way,” Gunn said. “It is our desire to put more money back in the pockets of our fellow citizens. We have an opportunity right now like we’ve never had before and probably never will again.

Harkins told members of the Finance Committee that the Senate tax plan was “aggressive,” but not reckless. He said the current state budget is teeming with pandemic stimulus dollars that he called “federal government cocaine” that will dry up. He also noted that lawmakers this session have already pledged hundreds of millions of dollars a year in new spending for things like a big pay raise for teachers.

“Mississippi had a banner year for revenue, so it was imperative for me to develop a sustainable tax relief plan that returns taxpayers’ money to taxpayers without raising rates,” Harkins said. “The most important thing we can do as Conservatives is to get it right – and this plan delivers substantial reduction while balancing the budget.”

Reeves’ office did not immediately respond to a request for comment on the Senate plan.

Reeves, who made a relatively rare appearance on the Senate floor Tuesday where he chatted with senators, posted on social media Monday, “By eliminating the income tax, we can put Mississippi in a position to stand out. We can lay the welcome rug for dreamers and visionaries. We can have more money circulating in our economy…and that can lead to more wealth for all Mississippians.

While Reeves in the past has criticized Gunn’s plan as a “tax swap” because it raises sales taxes to compensate for the elimination of income taxes, more recently he praised Gunn and management. of the House for their efforts.

Fellow Republican Hosemann noted that the Senate’s income tax cut plan was based on tax cuts at the time. Governor Reeves and Gunn defended in 2016, which phased out the state’s 3% tax bracket and continues to phase out the corporate franchise tax.

Hosemann said he and the Senate leadership plan to “enthusiastically” support their plan and he and Harkins both declined to comment on or analyze the House plan.

— Article credit to Geoff Pender of Mississippi Today —

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