State House passes inventory tax legislation

JACKSON — Businesses that pay inventory tax would get a financial break under a bill making its way through the Mississippi Legislature, where the issue has stalled in the past several years.

Supporters say the plan could spur economic growth by helping small businesses keep more of their own money that they could use to create jobs.

Opponents, however, say the proposal could hurt education and other state services by draining away tax dollars in an already poor state.

The inventory tax is paid to local governments, and that would not change.

Under a bill that passed the House 84-33 yesterday, businesses paying the inventory tax would be eligible for state income-tax credits up to the amount the business pays in the inventory tax. The changes would be phased in between 2014 and 2019.

The state might lose about $119 million a year by the time the change is fully in place, but the cities and counties will keep “every precious penny” they’re receiving from the inventory tax, said House Ways and Means Committee Chairman Jeff Smith, R-Columbus.

“This does not affect the city coffers one iota,” Smith said.

Smith said accountants estimate the state could lose about $7 million in 2014 and that could escalate to a loss of about $119 million by 2019. But he said the revenue losses could be smaller — or could be offset — if the tax change spurs economic growth.

Rep. Kelvin Buck, D-Holly Springs, said there’s no guarantee that businesses will add more jobs or do other things to improve the economy, so the tax change could be a direct loss to the state. He pointed out that an education funding formula that was put into law in 1997 has been fully funded only twice. He also said community colleges are asking for more state money.

The bill moves to the Senate for more work.

Smith said Mississippi is one of eight states with an inventory tax, and that’s a disadvantage in trying to lure new businesses. Lobbyists for the Mississippi Manufacturers Association watched the debate from a House balcony yesterday, then shook representatives’ hands as the lawmakers left the chamber after the bill passed.

Bills proposing different changes in the inventory tax have passed the Senate in recent years but died in the House. One bill died during negotiations between the two chambers late in a session.

Rep. Percy Watson, D-Hattiesburg, was chairman of the House Ways and Means Committee the past two terms. During yesterday’s debate, he said: “This is something reasonable men and women can disagree on.”

The bill is House Bill 536.

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