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The Mississippi House and Senate have passed separate tax plans aimed at eliminating the state income tax and raising gasoline taxes, setting the stage for negotiations over a final agreement. While both chambers support cutting income taxes, they differ on how to offset revenue losses and fund critical state services.
Senate Narrowly Passes Its Plan with Democratic Support
The Republican-led Senate barely secured enough votes to pass its proposal, relying on the support of four Democratic senators: Sarita Simmons, Juan Barnett, Gary Brumfield, and Angela Turner Ford. Their votes ensured the bill’s passage despite four Republican senators voting against it and another four voting “present.”
The close vote signals a fragile coalition in the Senate, raising doubts about whether a more aggressive income tax elimination plan could succeed. Senate Finance Chairman Josh Harkins acknowledged the challenge, saying, “This vote shows there isn’t a huge appetite to accelerate income tax cuts as quickly as the House wants.”
House Pushes for Full Income Tax Elimination
The Mississippi House took a more aggressive approach, passing a plan to fully eliminate the state income tax by 2037. The bill, which passed 91-27 with bipartisan support, would gradually phase out the tax starting in 2026. All House Republicans backed the measure, along with 11 Democrats who crossed party lines.
House Ways and Means Chairman Trey Lamar defended the plan, calling it “the most substantial tax cut Mississippi has ever seen.” But House Democratic Leader Robert Johnson warned that the proposal could “gut public education, public safety, and health services” as federal spending cuts loom.
Key Differences Between House and Senate Tax Plans
While both chambers support cutting income taxes, they diverge on other tax policies:
House Plan
- Eliminates the income tax by 2037, starting with a reduction from 4% to 3.5% in 2026.
- Cuts $2.2 billion from the state’s $7 billion budget while raising $750 million through tax increases.
- Raises the state sales tax from 7% to 8%, with $48 million earmarked for infrastructure.
- Adds a 15-cent-per-gallon gasoline tax, phased in over three years.
- Cuts the grocery tax from 7% to 5%.
- Increases the “use tax” (on out-of-state purchases) from 7% to 8%.
- Creates a $200 annual property tax credit for seniors.
- Transfers $100 million per year from the state lottery to the public employee retirement system (PERS).
Senate Plan
- Gradually reduces the income tax to 3% by 2030, with future reductions tied to revenue growth.
- Cuts the grocery tax from 7% to 5%.
- Increases the gasoline tax by 9 cents per gallon over three years, with future increases tied to road construction costs.
- Changes retirement benefits for government employees hired after March 2026, shifting to a hybrid pension system.
What’s Next? House and Senate Face Key Negotiations
Both chambers must now reconcile their differences in a conference committee, where six lawmakers will draft a final compromise.
One of the biggest sticking points is public employee retirement funding. The Senate wants to reform the retirement system, while the House prefers dedicating lottery and sports betting revenue to PERS instead of cutting benefits.
House Speaker Jason White has vowed to push back against the Senate’s plan to overhaul PERS, suggesting that revenue from legalizing mobile sports betting could help fund the system instead.
The Senate remains reluctant to embrace online sports betting, adding another point of contention in negotiations.
Broader Economic Concerns
Mississippi’s reliance on federal funding complicates tax reform efforts. The state receives nearly $3 in federal funds for every $1 in taxes it pays, meaning federal budget cuts could intensify the financial impact of state tax reductions.
Experts warn that eliminating the income tax while raising regressive taxes, like sales and fuel taxes, could disproportionately affect low-income Mississippians.
As negotiations continue, the question remains: Will Mississippi find a path forward that balances tax relief with fiscal responsibility?
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