That’s one possible outcome of a “tax shift” that some people are discussing as the 2016 legislative approaches.
It would work something like this: lawmakers would vote to raise fuel or other taxes to repave roads and rebuild bridges. But at the same time they would vote to cut other taxes, either Mississippi’s corporate franchise tax or some or all of its personal income tax.
The tax cut might even be big enough to outweigh the $375 million tax increase proposed Friday by the Mississippi Economic Council for transportation.
Joe Sanderson Jr., who led a transportation study for MEC, the state’s Chamber of Commerce, made the idea explicit in a speech Friday.
“There are current conversations about phasing out the corporate franchise tax and reducing personal income taxes to stimulate economic growth,” Sanderson said. “There is no reason why a strategy for boosting our state’s economy through improving highways, roads and bridges, cannot be combined with efforts to make our tax climate more competitive.”
Answering questions after the speech, he told reporters that “you could come up with a net tax decrease.”
That echoes the position of Gov. Phil Bryant, who in a statement Friday on the MEC report, said that “any tax increase must be offset by corresponding tax cuts.”
But unless the tax cuts proposed are drastically different than those considered in the Legislature last year, people in lower income brackets could benefit less than people in higher income brackets.
Here’s why. Last year, Republican lawmakers tried to eliminate Mississippi’s franchise tax, and to reduce or eliminate its personal income tax.
After granting more than $350 million of tax cuts to businesses since 2011, even some Republicans were uneasy about eliminating Mississippi’s corporate franchise tax, which charges a 2.5 percent levy on business property or capital employed. Business groups, especially banks and manufacturers, dislike franchise taxes because they apply not only when a business is profitable but also when it’s losing money. Business groups including MEC have long aimed to eliminate Mississippi’s franchise tax. According to Tax Analysts, a publication on taxes, 18 states impose a franchise tax.
Income tax reductions also fall unevenly, because many low-income households pay little or no income taxes. A plan to phase out income taxes on incomes under $18,300 proposed last year would have been more beneficial to the highest earning households. The lowest-earning 20 percent of taxpayers, making $16,000 or less, would have saved an average of $13 a year under the plan, according to an analysis by the liberal-leaning Institute on Taxation and Economic Policy . Those earning in the top 95 percent to 99 percent of households, with incomes from $156,000 to $324,000, would collect an average of $631 a year. That’s in part because high-income households are much more likely to have two people earning large salaries.
There’s some academic disagreement about how hard gasoline taxes hit various economic levels of society. Some studies have found that the poorest households, because they’re less likely to own a car, aren’t as hard hit. But that might be less true in Mississippi, where the rural nature of the state and low public transit use mean people tend to be more dependent on cars to get around. Everyone agrees that richer people pay a smaller share of their income for gas, which may mean that middle-class people are hardest hit.
Sanderson rejected the idea that a gas tax might hurt poor people more than rich people.
“MEC would never endorse something that’s unfair,” he said.
— JEFF AMY, Associated Press