By TED CARTER
Whatever chance a tax cut for either Mississippi’s businesses or individuals has this legislative session will be decided by a six-member conference committee appointed by House and Senate leaders.
Adding to the difficulties of choices before the conference is a growing tax collections shortfall that represents collections that fell approximately $20 million below projections for each month since November, the state Department of Revenue says. The losses to the General Fund forced Gov. Phil Bryant to order $39 million in emergency budget cuts on Jan. 20, when collections through December were $53.9 million short of estimates. The shortfall has grown by $25.7 million since Bryant ordered the cuts.
The huge drops in revenue follow tax cuts of about $350 million Bryant initiated in his first term. The cuts included $150 million in sales tax rebates to developers of retail centers, another $100 million in annual revenue losses through limits on the taxing of multi-state corporations and an additional $100 million annually in cuts to the business inventory tax.
As the 2016 session got under way, the Senate passed a full menu of tax breaks, including 15-year phaseouts of the business franchise tax and the lowest bracket of the personal income tax. The Revenue Department put a total cost of $575 million on the Senate package. The House, in turn, whittled the package to include $135 million in income taxes beginning Jan. 1, raising the threshold for paying state income taxes to $10,000. Anyone making that much would get a $150 tax cut. The cut would begin in 2017.
The Senate declined to take up the House version, thus setting the stage for conference consideration of the competing tax cutting measures.
The conference could meld the House and Senate versions, settle on either version or scrap the cuts altogether. Conference members must decide by April 18 on what, if anything, to send to the two houses.
Bryant conceded in January the state started the fiscal year with a General Fund about $10 million in the hole.
The shortfall did not dissuade Bryant from backing Lt. Gov. Tate Reeves’ proposal for a 15-year phaseout of the franchise tax on business assets. Mississippi’s franchise levy is $2.50 per each $1,000 of either the value of the capital invested or the assessed value of property held in the state, whichever is greater. The state has a minimum franchise tax of $25.
The tax generated $260 million in the 2015 fiscal year that ended June 30. Collections for fiscal 2014 totaled $242 million.
Projections are the cuts would cost the state $100 annually.
The first-year hit to the state’s budget is projected at $18 million, according to Sen. Joey Fillingane, chairman of the Senate Finance Committee.
Bryant, Fillingane and other leaders in the Republican controlled Legislature insist that with time, the tax cuts will spur new business spending and job creation, thus boosting state revenues.
Filllingane said after Bryant’s emergency budget cuts Mississippi is still on sound footing and won’t feel the kind of fiscal duress neighboring Louisiana is enduring this year after several years of extensive tax cutting by former Gov. Bobby Jindal.
First, he said, the bottom fell out of the oil and gas market there, severely diminishing state revenue collections. On top of that, he said, Louisiana “began spending one-time money like drunken sailors.”
Nor, will Mississippi feel the fiscal pain Kansas has felt the past several years after drastic tax cutting, he said. “They cut, like, everything,” Fillingane said. “We are not cutting anything like the amount Kansas” cut.
Reeves said he sees in this way in published remarks: “We don’t need to grow the size of government; we need to grow the size of Mississippi’s economy.”
The newly appointed Mississippi tax commissioner, House Appropriations Committee Chairman Herb Frierson is not so sure cutting taxes without cutting government is a practical approach. “To be honest I don’t have a lot of confidence in growth,” Frierson told Northeast Mississippi Journal state government reporter Bobby Harrison in a recent interview.
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