The Mississippi House and the Senate have competing plans to reduce taxes. The Senate proposes to cut taxes by $538 million. The House proposes to cut taxes $1.1 billion.
These numbers can be fuzzy based on how you do the math, but there is no doubt the House, backed by Gov. Tate Reeves, wants to cut more aggressively than the Senate.
Both chambers plan to phase in their tax cuts.
Rather than eliminating the personal income tax, as the House and Gov. Tate Reeves want, the Senate proposes to continue trimming it. Already in the process of being reduced to 4 percent by next year, the Senate would keep slicing the tax rate annually until it reaches a flat rate of just under three percent in 2030.
The House bill would reduce the income tax rate from 4 percent to 3 percent next year. Then, it would reduce the rate by .3 percent each additional year until the tax is eliminated in 10 years.
The Senate is also more cautious on the grocery tax, which would fall to 5 percent next summer and stay there. The House plan is to reduce it to 4.5 percent initially and then make more cuts later until the tax leveled out at 2.5 percent.
In order to pay for the deeper cuts and not penalize cities, which depend on a share of the state sales tax to operate, the House would offset some of this by allowing both cities and counties to adopt a 1.5 percent local sales tax, including on groceries. The Senate has no local sales tax option.
In this sense, the House plan is somewhat deceptive. What good is it to lower the grocery state sales tax only to have it replaced by higher local and city taxes? You could argue that the House grocery tax plan could end up raising sales taxes overall. After all, consumers just feel the pain of the tax. What is the difference if it is a local or state tax?
It’s heartening to see both the House and Senate realize the need to better fund the Mississippi Department of Transportation. Our state is leaving hundreds of millions of federal dollars on the table by not being able to come up with the 10 or 20 percent state match.
I realize that Mississippians are conservative and believe in low taxes and less government. But when the richest nation in the world wants to help the poorest state in the nation, why not take the money? I call that “falling on your ideological sword.”
The House would add a 5 percent sales tax on fuel, or roughly 15 cents a gallon on what gasoline has been costing. The Senate wants to instead increase the excise tax, which has been stuck at 18.4 cents a gallon since 1987, by 9 cents over a three-year period.
The Senate plan has less cuts but they are implemented more rapidly. The House plan has a bigger cut but over a longer time. Lieutenant Governor Delbert Hosemann argues that the long-range implementation of the House plan is a negative because it’s impossible to predict what will happen in ten years, including complete repeal of the plan.
Hosemann also argues, and I agree, that his plan is more balanced because it does not completely eliminate the income tax. Sales tax revenue can fluctuate significantly and having a separate stream of revenue based on income can offset these fluctuations and create a more stable funding base for the government.
There is another reason for retaining a modest level of state income tax: basic fairness. Most Mississippi families struggle to make ends meet. A higher percentage of their income is spent buying food, clothes and the basic necessities of life. Sales taxes hit lower income families harder.
As a free market believer, I generally favor lower taxes. Free individuals know better how to spend their money than government bureaucrats. But like any ideological belief, the devil is in the details. There are plenty of free individuals who squander money on drugs, booze, cigarettes and frivolous purchases.
Meanwhile, there are many pressing state needs: our prison system, education, roads, infrastructure and the like. It’s not quite as simple as some ideologues prefer to believe.
Hosemann also argues that the current statewide economic unpredictability makes his cautious approach better. The decline in soybean prices is wreaking havoc for farmers. And who knows what the ultimate effect of a trade war will be on the state economy. Mississippi exports billions, especially in agriculture.
For the last 80 years, the United States has fought for free global markets and low tariffs. This philosophy has ushered in the greatest growth in world GDP in history. Forty years ago, 40 percent of the world lived on less than one dollar a day. Today, that percentage is 10 percent.
The U. S. has been both an instigator and a beneficiary of this amazing world economic progress. The dollar is the world currency, allowing us to essentially print an unlimited amount of money.
President Trump is making a huge gamble by initiating a global trade war. You can’t be the world leader while retreating into a role of economic isolation and restrictive trade tariffs. Hosemann is right. There is a great deal of economic uncertainty right now that behooves his more cautious approach.
Then there is Trump’s abrupt change about Ukraine. Personally, I think Zelenskyy is a great hero, a freedom fighter who will go down in history, like Lech Walesa of Poland, as the founder of his country, despite Russia’s deluge of fake propaganda against him. I cringed to see him insulted in the Oval Office.
But Trump is right to seek an end to the bloodshed. Enough is enough.
Will Trump go down as a brilliant peacemaker or the next Neville Chamberlain?
Just like his other bold moves, only time will tell.
