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Senators proposing halting tax cut to pay for infrastructure

DAVID BLOUNT

DAVID BLOUNT

By BOBBY HARRISON

A group of Senate Democrats is proposing to repeal the largest tax cut in the state’s history and direct those funds to roads and bridges.

The Legislature, led by Republican Lt. Gov. Tate Reeves, passed the tax cut – $415 million in today’s dollars to be completely phased in by 2024 – during the 2016 session. For more than a year, the state’s business community, led by the Mississippi Economic Council, has been urging legislators to pass a comprehensive infrastructure improvement bill. Legislators have been reluctant, however, to pass a tax increase to pay for such a plan.

“That one simple thing (repealing the 2016 tax cut) will generate more than $6 billion (over 20 years) for infrastructure without raising a nickel in taxes on anyone,” said Sen. David Blount, D-Jackson.

Blount, along with Sens. Hob Bryan, D-Amory; Angela Turner, D-West Point; and Sollie Norwood, D-Jackson; said at a Wednesday news conference at the state Capitol that this is the first concrete proposal to deal with the state’s many infrastructure needs.

“I think everyone knows we have a crisis, and what has been missing so far are specific proposals on how to address that crisis,” Blount said.

The senators said repealing the tax cut now would not be considered a tax increase because the phase-out does not begin until the next fiscal year. No one has been impacted yet by the bill.

Even though MEC and other business groups have advocated for a major infrastructure improvement plan, it is not likely they would support the Senate Democrats’ proposal. The business groups also were strong proponents for the 2016 tax cut legislation.

The tax cut will phase out the business franchise tax, a levy on a business’s capital, reduce the income tax for both corporations and individuals and cut taxes for the self employed. The largest portion of the tax cut is the estimated $260 million impact of the elimination of the franchise tax.

Bryan said the tax cut favors larger businesses. Of the companies that pay the tax, 91 percent pay less than $1,000 annually. Plus, Bryan said more than 85 percent of the companies that pay the levy are not located in Mississippi.

The conventional wisdom is that any infrastructure plan would be financed by an increase in the 18.4-cent tax on a gallon of motor fuel.

Of the plan to repeal last session’s tax cut instead of increasing the tax on gasoline, Blount said, “We believe this is a necessary and essential first step in generating revenue and maintaining tax fairness for the middle class.”

Turner said it is “fiscally irresponsible to allow this tax cut to go forward” in light of the financial needs facing the state.

The senators conceded their plan faces long odds. Reeves has said the tax cut is key to growing the economy by making Mississippi’s tax structure more competitive with other states. Legislative leaders currently are looking at other possible tax changes to consider during the 2017 session.

Laura Hipp, a spokeswoman for Reeves, said he “believes raising taxes on Mississippians’ income or employers’ investment will hamper long-term economic growth.”

bobby.harrison@journalinc.com

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