Mississippi House proposes tax cut plan while raising gas taxes

In Mississippi, the House of Representatives recently introduced a comprehensive tax reform initiative aimed at abolishing the state income tax. This plan includes significant reductions in taxes on groceries, which are set to decrease from 7% to 2.5% over time. To compensate for the revenue loss, local sales taxes will be increased, and a new 5% tax on gasoline sales will be instituted, with proceeds earmarked for state road and bridge maintenance. Supporters claim that this transition towards a consumption-based tax structure will promote economic growth and minimize potential negative impacts on government services. The proposal, spearheaded by House Speaker Jason White and championed by Republican Rep. Trey Lamar, suggests a reduction of the current 4% income tax rate to 3% in the upcoming year. Lamar describes the legislation as transformative and significant for Mississippi's economic future, emphasizing a shift to a tax system that he believes will enhance the state's competitive edge. Notably, the plan eliminates an 18.5% diversion of sales tax revenue to municipalities, redirecting those funds to the state budget to offset the anticipated loss. Local leaders, such as Oxford's Mayor Robyn Tannehill, endorse the addition of a 1.5% local sales tax, viewing it as a way to ensure adequate funding for municipal needs. The 5% gasoline tax is projected to generate up to $400 million annually for the Mississippi Department of Transportation. The plan's supporters assert that this approach will create a more stable and growth-oriented economy, despite concerns regarding the heavy reliance on consumption-based taxes, which disproportionately affect low-income individuals who allocate more of their income towards goods and services. With support from Governor Tate Reeves still in question, the proposal is expected to undergo committee discussions before reaching the full House vote. If passed, it will proceed to the Senate Finance Committee for further evaluation. The recent passage of a similar proposal indicates momentum for tax reforms in the state, which has been a longstanding agenda item for Republican leaders. The legislation, which aims to significantly adjust Mississippi's tax landscape, may lead to heated debates as lawmakers search for a balanced approach to fiscal policy that meets the needs of both the state and its residents.