OPINION: Can state really afford income tax cut?

As expected, the top priority in Gov. Tate Reeve’s proposed budget for FY 2024 was elimination of the state income tax. The Governor noted that “Mississippi now has the 5th lowest marginal tax rate in the entire nation,” but apparently that is not good enough. “Mississippi must take further steps to remain competitive and to attract new investments to the state,” he said.

His proposal calls for the 4% tax bracket currently being phased out to be eliminated all at once, then the final 5% bracket eliminated 1% a year until it is gone.

“Mississippi can afford to eliminate its income tax” and will not have to cut budgets to do so, Reeves contends. For FY 2022 the personal income tax generated a little less than the state sales tax for the general fund, about $2.2 billion compared to $2.5 billion. These two sources provide about 70% of general fund revenues.

Hmmm.

That probably means sales tax collections would need to more than double over the next five years to makeup the difference. Sales taxes did jump about $309 million from FY2021, spurred by federal recovery dollars. But over the previous five years collections were up $88 million, $18 million, $56 million, $27 million, and down $7 million. It will take some magic to make up $2.2 billion a year in five years.

A review of other items in the Governor’s budget shows he either doesn’t pay much attention to the details or he doesn’t appreciate the impact inflation will have. Over 90% of the line items for FY 2024 are listed at the exact same amounts as the Legislature’s final budget for FY 2023. A big one left flat was for the Mississippi Adequate Education Act, i.e., school funding. With inflation running at 8%, expecting schools and agencies to operate for the same amount will amount to a noticeable cut.

Just as he protected children from non-existent critical race theory teaching in schools this year, the Governor now wants to protect children from “new controversial, experimental social science experiments” he said are popping up in other states (but not Mississippi). His Mississippi Parents’ Bill of Rights would prevent that. Of course the bill outlawing critical race theory didn’t really. Wonder what this bill would really do.

The Governor proposed a child care tax credit, so long as the income tax remains. Apparently a permanent program is not needed.

“We will build a future that every Mississippian can be proud of,” the Governor proclaimed in his press release. That’s a pretty stout claim given the United Way’s ALICE project (Asset Limited, Income Constrained, and Employed) estimated in 2021 that 50% of Mississippi households were left out or left behind – 19 percent living below the poverty line plus another 31 percent too poor to afford the basics of housing, child care, food, transportation, health care, and technology due to low wages.

The Legislature’s budget proposal comes out soon. It likely will be quite different.

“Good men will be generous to others” – Isaiah 32:6.

Crawford is a syndicated columnist from Jackson.