Lt. Gov. Tate Reeves and Republican senators are renewing their effort to push through a $575 million package of tax cuts, even as Mississippi officials consider a revenue shortfall and the prospect of raising other taxes for transportation.
The Senate Finance Committee approved Senate Bill 2858 on a split voice vote Wednesday, and Reeves said the full Senate could take it up as early as Thursday. The bill would phase in reductions through 2030.
“I’m looking for policies that grow the size of the state’s economy and I believe this proposal will lead to long-term economic growth,” the Republican Reeves said.
Opponents, though, say the plan would cripple Mississippi’s ability to provide state services and too many of the benefits would flow to corporations and higher-income households.
“With all the needs in the state — health care, roads, criminal justice, all the people we tell we want to help — what we’re saying today is we’d rather do this,” Sen. David Blount, D-Jackson, said in the committee meeting.
The measure is almost identical to a 2015 bill that House Democrats blocked after Republican leaders floated a series of tax cut proposals. However, with a shrunken minority, Democrats would no longer have the votes there to block the 60 percent majority required in each chamber of Mississippi’s Legislature.
The proposal would phase out Mississippi’s $260-million-a-year business franchise tax over eight years starting in 2018. Removing the tax on capital is a long-held goal of business groups including banks and manufacturers. Reeves said it hurts Mississippi’s ability to recruit industry.
It would also increase the self-employment deduction people could claim on their state income taxes, cutting collections by $10.2 million over three years starting July 1, according to state Revenue Department estimates.
Finally, the plan would phase out Mississippi’s 3 percent income tax bracket over five years starting in 2016, and then phase out the 4 percent bracket over five years starting in 2026. The threshold for collecting state income tax would rise from $8,300 to $18,300, giving anyone with $18,300 in taxable income a $350 tax cut.
Overall, that would cut individual income tax collections by $300 million and corporate income tax collections by $4.4 million, the Revenue Department estimates.
Like most other proposed income tax cuts, benefits would flow most to high-earning households. Projections from the liberal-leaning Institute on Taxation and Economic Policy for last year’s proposal showed the lowest-earning 20 percent of taxpayers, making $16,000 or less, would save an average of $13 a year. 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. High-income households are more likely to have two people earning large salaries.
Reeves’ plan would cut $18 million from the budget beginning July 1 that lawmakers are currently writing. Revenues in the current year are running nearly $60 million short of projections.
The House on Wednesday passed more than 50 early versions of budget bills for fiscal 2017, which begins July 1. The bills, which go to the Senate for more work, include a provision that says if revenue is reduced for fiscal 2017, there must be across-the-board spending cuts for all state programs, including education.
“Everybody wants to cut taxes, but nobody wants to cut budgets,” said House Appropriations Committee Chairman Herb Frierson, R-Poplarville.
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