The minority Democrats in the Mississippi Legislature held hearings Wednesday counter to “working groups” formed by House Speaker Philip Gunn and Lt. Gov. Tate Reeves to study the state’s taxing and budgeting process and make recommendations to the full Legislature.
Reeves and Gunn, buoyed by recommendations from the non-profit Washington, D.C.-based Tax Foundation, have said they want to move away from taxing income and toward taxing consumption, such as the sales tax and use tax.
Some, particularly Democrats, have complained that such a move would place more of a burden on low income Mississippians, since they would be having to pay a greater share of their income for necessities, such as groceries.
At Wednesday’s hearing, Jeanie Donovan with the Jesuit Social Research Institute at Loyola University in New Orleans, backed up Democrats’ concerns.
“The state’s low- and middle-income earners paid nearly double the percentage of their income in taxes compared to the state’s highest income families,” Donovan wrote in a report compiled for the legislators, basing her findings on a 2015 study by the Washington, D.C.-based Institute of Taxation and Economic Policy.
For instance, according to the study, those earning up to $74 per hour pay up to 9.2 percent of their income in state and local taxes while those earning more than $74 per hour pay on average no more than 7.6 percent of their income in state and local taxes. And higher income earners pay even less.
The reason, Donovan said, is that the state has a heavy reliance on the sales tax, which accounts for about 40 percent of general fund revenue. In addition, she said, Mississippi – which has the highest percentage of people living in poverty – has the highest state-imposed sales tax on groceries.
“Sales taxes inevitably take a larger share of income from low- and middle-income people,” she wrote.
During the 2016 session, the Legislature passed the largest tax cut in the state’s history – $415 million in today’s dollars – that will be phased in over the next decade. The cuts will be for businesses and on personal income. But according to information compiled by Donovan, the income tax cut will be much more beneficial for high-wage earners. For instance, the cut will be at least $220 annually for someone earning at least $84,000 and no more than $130 per year for someone earning less than $45,000.
Nicole Kaeding, an economist for the Tax Foundation, who has been advising the legislative leadership on tax issues, has said that in changing the tax policy, legislators should look to broaden the base, such as removing some of the state’s multiple sales tax exemptions.
For instance, she conceded removing an exemption on prescription drugs might be difficult to do because of the negative impact it would have on poor residents who are less likely to have health insurance to help pay for the medication. But she said placing a sales tax on a gym membership or a fitness trainer probably would be a tax paid by the more affluent residents.
Donovan, like others have said, reported the state is not recovering from the recession of 2008-09 as fast as the rest of the nation. Both wage growth and jobs growth are slower than that of the nation as a whole.
Mississippi, she said, still has more than 18,000 fewer jobs than it did before the recession. Northeast Mississippi has experienced modest jobs growth, she said, with a 1.1 percent increase. Southeast Mississippi has had a much more substantial 14.5 percent increase. Other areas have seen major decreases.
In addition, Donovan said all but the top 10 percent and the bottom 10 percent have experienced a drop in their wages since the recession.
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