The Mississippi House of Representatives approved a significant tax reform initiative known as House Bill 1, which aims to phase out the state income tax while reducing the grocery tax and increasing sales and gasoline taxes. The bill secured a bipartisan vote of 88-24, with all opposition coming from Democratic members. It now moves to the Senate for further deliberation.
Authored by Republican Rep. Trey Lamar from Senatobia and other key House leaders, the proposal has garnered support from nine Democratic members and saw seven others voting “present,” indicating neutrality. House Speaker Jason White emphasized the importance of the bill to his party, stating, “A lot of my Republicans were speaking as one as a caucus that this is important to them and to their constituents… it’ll be a strong position for me as speaker to advocate for its passage.”
Financial Impacts of House Bill 1
The legislative plan proposes to cut approximately $1.1 billion from the state’s $7 billion general fund over time. Proponents argue that anticipated economic growth will offset this loss, allowing government services to remain intact. However, critics caution against long-term tax cuts during economic uncertainty, warning that such changes could lead to a more regressive tax system disproportionately affecting low-income households.
The tax reform plan includes a reduction of the income tax rate from 4% to 3% next year, with subsequent annual cuts of 0.3% until the tax is fully eliminated within a decade. Moreover, a new local sales tax of 1.5% would increase the state’s total sales tax from 7% to 8.5%, while the tax on unprepared food would gradually decrease from 7% to 2.5—netting a new grocery tax of 4% once fully implemented due to the local sales tax.
Addressing Concerns from Critics
Democratic leaders, including House Minority Leader Robert Johnson III, expressed concerns about the adequacy of the proposed fiscal measures, suggesting that they may impose excessive burdens on lower-income residents. Johnson remarked, “This is putting a burden on working people,” highlighting the need for a balanced approach to tax reform.
In a bid for immediate relief, Democratic Rep. Omeria Scott proposed an amendment for an instant reduction in the grocery tax. This amendment was ultimately rejected by the Republican majority.
The bill also introduces a new 5% tax on gasoline sales aimed at funding the Mississippi Department of Transportation. This tax is expected to raise approximately $400 million annually, addressing long-standing calls for improved infrastructure funding. The proposed increase would add about 13 cents to the current average gas price of $2.62 per gallon, which is currently subject to an 18.4 cents-per-gallon flat tax.
Leadership Response and Next Steps
Transportation leaders, including Willie Simmons and Brad White, acknowledged the House’s efforts to address infrastructure funding in their joint statement, though they did not provide explicit support for the bill itself.
As the legislation now heads to the Senate, the support of Republican Governor Tate Reeves remains uncertain. His office has not yet commented on the House’s proposal, but historically, he has expressed skepticism toward “tax swaps” that alter the overall tax system while modifying various tax rates.
In 2022, the GOP majority passed a comprehensive tax cut plan that has yet to be fully implemented, and Senate leadership, including Republican Lt. Gov. Delbert Hosemann, has indicated plans to pursue further immediate reductions in the sales tax on groceries and the income tax.
Speaker White has expressed readiness to negotiate with Senate leaders but maintained that his ultimate objective is to eliminate the income tax altogether, aiming to forge a path for the proposed tax reforms in the coming legislative sessions.
Conclusion
As discussions surrounding House Bill 1 continue, its implications for everyday Mississippians remain a focal point. Stakeholders and citizens alike will be keenly observing how this groundbreaking legislation evolves and what it means for the state’s economic landscape moving forward.
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