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In a bold move that could reshape the fiscal identity of the American South, Mississippi lawmakers passed legislation to eliminate the state’s income tax, making it the tenth U.S. state to do so. But unlike others that tread this path with booming industries or diversified tax bases, Mississippi leaps forward with a question hanging in the air: what now?
At first glance, the move appears politically attractive. After all, who wouldn’t welcome a tax cut? But scratch the surface, and a more complex, even precarious, picture emerges.
Politics, Populism, and Posturing
The income tax repeal plays directly into the long-standing Republican vision of small government and pro-growth economic policy. Statehouse conservatives argue that Mississippi must become more competitive to attract businesses and residents from higher-tax states like California or Illinois.
But critics argue the decision isn’t about growth. It’s about ideology. “This isn’t reform; it’s fiscal Russian roulette,” a Democratic state senator said during a debate. That may sound dramatic, but there’s substance behind the rhetoric.
Unlike Florida or Texas, states without income taxes and with booming real estate or oil sectors, Mississippi ranks near the bottom in GDP per capita, educational outcomes, and health infrastructure. Its income tax accounted for roughly one-third of general fund revenue, or around $2.3 billion annually. That’s not pocket change.
Who Pays the Price?
Removing the income tax without a clear, diversified revenue replacement plan creates a funding vacuum. Historically, states that eliminate income tax rely more heavily on sales and property taxes, both regressive forms of taxation that hit lower-income households harder.
Let’s be clear: Mississippi already has the 5th most regressive tax system in the U.S., according to the Institute on Taxation and Economic Policy (ITEP). This reform could tilt that scale further, widening inequality in one of America’s poorest states.
Education and healthcare, often the largest line items in state budgets, could be squeezed first. Mississippi ranks 46th in K-12 public education spending and among the bottom in healthcare outcomes. Some economists warn that stripping a core revenue stream without a protective plan borders recklessness.
Lessons from the Past (and the Neighbors)
Kansas tried a similar tax-slashing experiment under Governor Sam Brownback in the early 2010s, only to reverse course after a fiscal crisis gutted schools and infrastructure. The cautionary tale still echoes in policy circles.
On the other hand, Tennessee successfully transitioned away from income tax. Still, it did so gradually, phasing out its Hall Income Tax on investments while maintaining a broad sales tax base and drawing revenue from a rapidly growing population and tourism economy.
Mississippi lacks these luxuries. Its population has shrunk for five straight years, and tourism contributes far less to its coffers.
The Unanswered Questions
Governor Tate Reeves insists that economic growth will fill the void. “A tax-free Mississippi will attract jobs, capital, and opportunity,” he stated during the signing ceremony.
That may be optimistic. Attracting industry depends on more than low taxes it requires skilled labor, infrastructure, and trust in stable governance.
If revenue falls short, will Mississippi cut social services? Will counties raise property taxes? Will the burden shift silently to municipalities, many of which already struggle to fund basic operations?
Business leaders are watching closely. A lower tax bill is appealing, but underfunded roads, undertrained workers, and unstable governance are not.
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