If House Speaker Philip Gunn wanted to get more Democratic lawmakers on board with his aggressive tax cut program, he figured out the right way to do it: Include car tags.
The speaker’s Mississippi Tax Freedom Act passed by a 97-12 vote last week. As with prior proposals, it will eliminate the state income tax over a period of 10-12 years and reduce the sales tax on food.
The new idea was a proposal to cut the cost of car tags by 35%, with the state returning money to counties, which assess and collect the vehicle taxes, to make up the lost revenue.
A surprising element of the vote is that a slight majority of the 43 Democrats in the House supported the tax cuts. But a second surprise occurred the next day, when the House Ways and Means Committee chairman asked that the bill be reconsidered.
The reason, said Rep. Trey Lamar, R-Senatobia, is that further study indicated the state could afford to reduce car tags by 50% instead of the 35% in the original language.
That increased the bill’s support to 107-4 margin, as eight Democratic opponents of the original measure changed their minds.
The Mississippi Today website quoted a couple of Democratic senators who have opposed prior Republican tax cut pitches but said the car tag reduction won them over. A smaller hike in the non-food sales tax — this year’s bill would raise it from the current 7% to 8.5%, while last year’s called for a 9.5% sales tax — probably played a role as well, especially when coupled with a decrease in the sales tax on food.
Before anybody starts celebrating no state income tax and a much cheaper car tag, keep in mind that the Senate still has to consider the bill. It did not like what it got from the House last year, and it let the proposal die — so let’s see if the car tag sweetener has any effect this year.
Gov. Tate Reeves also gets a say in whether Gunn’s bill becomes law, although a large victory in the Senate would reduce his influence.
Something else to keep in mind about the tax cuts is this: If it becomes law, Mississippi over time would remove about 22% of its current revenue stream. When in full effect, estimates predict this bill would remove $1.5 billion in today’s dollars from a $6.6 billion annual budget.
Proponents of the tax cuts note that the state ran a huge budget surplus last year. True, but that was because of immense pandemic relief assistance from the federal government that is by no means guaranteed to continue.
At some point, both the world and the Mississippi economy are going to start drifting back toward normal — which almost certainly does not include huge revenue surpluses. So whomever’s making forecasts about Mississippi’s economy had better be giving lawmakers worst-case scenarios along with any potential good news. And lawmakers had better be listening.
It’s just hard to see how the state can, in a fiscally sound manner, eliminate income taxes, cut food taxes and halve car tag costs without setting itself up for some serious budget pain.
— Jack Ryan, McComb Enterprise-Journal