The Mississippi House of Representatives will likely move on an ambitious $1.1 billion tax cut package this week, touting enormous cuts to the personal income and grocery sales taxes and adding tax revenue and other funds to several areas of the state budget to lighten the blow.
House Ways and Means Chairman Trey Lamar, the bill’s sponsor, on Friday told the Clarion Ledger he plans to bring House Bill 1 to his committee early this week for a vote and pass it up to the House chamber. If it passes through the House, it will move onto the Senate where leadership is considering a starkly different plan.
Because the measure is a revenue bill, House lawmakers have until Feb. 26 to send it over to the Senate. It would be phased in over a decade.
“A final decision hadn’t been made for sure yet, but I’d say it’s very likely that it can come up on the House floor [this] week as well,” Lamar said. “We’ve been working on (tax cuts) for years, and we’ve had a lot of time to talk to talk to members and vet it, so I am looking forward to bringing it out.”
Lamar said the package tackles several key areas such as completely cutting the state income tax burden on Mississippians, creating a fuel tax to pump money into road and bridge infrastructure, cutting down the sales tax on groceries and more.
“We felt like this is something that would be palatable to the ones that want us to be more cautious about cutting taxes,” Lamar said. “We also wanted to get it done in a reasonable time frame. We feel like 10 years is a good time frame to do that.”
House Speaker Jason White, R-West and Gov. Tate Reeves have both announced support for the legislation along with five of the eight statewide elected office holders as of Monday morning, according to Reeves.
“House Bill 1 is priority [No.] 1,” White said in a written statement. “We will Build Up Mississippi by eliminating the income tax to further our state’s competitive advantage and award our workforce. We will Build Up Mississippi by cutting the grocery tax in half to boost the pocketbook of Mississippians. We will Build Up Mississippi by developing a dedicated source of revenue for our critical infrastructure with maintenance and capacity projects. We will Build Up Mississippi by securing and stabilizing our state employee retirement plan, PERS. House Bill 1 Builds Up Mississippi with a $1 billion net tax cut — the largest tax cut in Mississippi history.”
Overall, the state will cut $2.2 billion in taxes while adding another $1.1 billion to make up for funding changes at the city and county level.
Tax cuts incoming in 2025:Legislative leaders say they want to pass tax cuts. Can they actually do it in 2025?
House Bill 1 would do the following:
Mississippi House tax plan details
HB 1 would:
- Eliminate $2.2 billion in income tax revenues over 10 years. The cut would become active once the state’s income tax is phased down to 4% by Fiscal Year 2027.
- Reduce state sales tax on groceries from 7% to 2.5% while adjusting tax structure on other items to offset the costs.
- Removes state sales tax diversions to municipalities and replaces it with a local-option 1.5% local sales tax. Cities will have the option to opt-out of this tax structure. Lamar said this will result in tax revenue increases across the state.
- Sales tax collected at 1.5% in counties will be diverted to road and bridge infrastructure needs at the county level.
- Add a fuel sales tax of 5% on retail sale of gasoline. This would be in addition to the state fuel tax already imposed. Lamar said this would add $400 million to the state budget, and all of those additional funds would go to the Mississippi Department of Transportation for road and bridge projects.
- The $80 million that was going to MDOT per year from gambling revenue will now be headed toward the Public Employee Retirement Systems of Mississippi to address a $25 billion deficit in future retirement benefits.
Under the House plan, sales taxes excluding groceries would essentially amount to 8.5%, which still puts Mississippi at a lower sales tax than its neighbors. Lamar said that was essential to maintaining a competitive edge with the state’s closest competitors.
“It’s the most transformational piece of legislation, really, in my career, maybe one of the most transformational pieces of legislation in Mississippi’s history,” Lamar said. “It gives more money to our cities and our counties, and it sets our infrastructure funding up to really support the business and commerce of Mississippi’s future.”
Senate plan differs, setting up Legislature for debates
Sen. Josh Harkins, R-Flowood, who chairs the Senate Finance Committee and will likely have to shepherd the Senate’s approach on tax reform this year, said he had not read the House’s 107-page bill, and he had no comment on it.
Harkins also said the Senate’s tax plan would be coming out soon and well before the legislative deadline to do so.
“We will have something here soon to offer,” Harkins said. “We’ve got a lot of other issues that we’re working on as well.”
2025 Session begins:Mississippi Legislature begins 2025 Session. See leaders’ goals for this year
Per legislative deadlines, Senate lawmakers have until Feb. 26 to pass their tax bill out of their chamber. If they take up the House bill, they have until March 18.
Last week, Lt. Gov. Delbert Hosemann unveiled specifics of his tax-reform plan with reporters.
Hosemann’s plan would do the following:
- Reduce personal income tax to 3% over a four-year period. The state’s income tax is currently being phased down to 4% by 2027.
- Reduce sales tax on groceries from 7% to 5%.
- Include measures that would pause tax cuts if state revenue began to fall to a certain extent.
Hosemann last week did not give an indication when Senate leadership would introduce its tax-cut plan.
Grant McLaughlin covers the Legislature and state government for the Clarion Ledger. He can be reached at [email protected] or 972-571-2335.
link