Business inventory tax, proclaimed as a jobs creation tool, projected to cost state $7M this year, then $126M in FY 2017
by Ted Carter
Published: March 28,2014
With fiscal 2014′s arrival, Mississippi’s businesses can begin enjoying the rewards of a hard-fought victory achieved in 2012 with passage of a phased-in state income tax credits for businesses that pay inventory taxes to cities and counties.
Legislative wrangling ended with establishing the tax credits in place of an actual end to the inventory tax, an outcome cities, counties and school districts fought hard against.
The compromise left the state to pick up a tab the Mississippi Department of Revenue projects will be $7 million this year with the tax credit at $5,000 per business location; $14 million in fiscal 2015 with the credit increased to $10,000 per location; $21 million in fiscal 2016 with the credit rising to $15,000 per location; and $126 million in fiscal 2017 with the credit growing to equal the amount of inventory tax paid.
Each of the phase-ins have tax credits limited to the amount due and have a 5-year carryover, which enables the business to use the credits during years it has income tax liability.
The National Federation of Independent Businesses /Mississippi projected in 2012 that the tax credits will save the state’s businesses $7 million a year. Supporters predicted during the legislative battle over the inventory tax issue that those savings would, in turn, generate new jobs.
With Mississippi having the nation 7th highest jobless rate at 7.5 percent, that prediction will be watched closely by supporters and opponents of the tax credits, either as generous business tax cuts or drawing back on them.
Sen. Hob Bryan, one of eight senators to vote against the tax credits, called passage of the measure, SB2934, one of the “worst days” of his long legislative career.
On the winning side, the National Federation of Independent Businesses /Mississippi says it did not get all it wanted and intends to push for even wider relief from the inventory tax, presumably once the state’s economy improves.
The original House-passed version, HB536, which NFIB/Mississippi favored, included increases in the income tax credit similar to those in the Senate version, SB2934, but it would also have allowed a full rebate of all inventory taxes paid by use of income tax credits and actual rebates by the state.
“Had the state not been in such a very tight budget situation on the heels of this the greatest of recessions, the outcome of this legislation, although a vast improvement, would have likely been much better,” said Ron Aldridge, state director of NFIB/Mississippi, in a message to federation members. “In the years ahead, NFIB will continue to push for full relief to this unfair tax.”
Any such effort is sure to meet resistance from the Mississippi Municipal League, which says its work led to creation of the tax credits rather than elimination of the inventory tax. “Through the League’s strong efforts and tireless negotiations we were able to reach a compromise,” a June 2012 Municipal League technical brief said.
The Municipal League argues that a total exemption of the inventory tax would cause a decrease in assessed values, forcing cities, counties and school districts to increase millage rates or cut budgets.
State Rep. William Shirley, a Quitman restaurant owner, has tried and failed the past two years to gain full elimination of the business inventory tax. His 2014 measure, HB9, perished in the House Ways & Means Committee this year.
Shirley’s particular target is the assessment value put on business equipment no matter its age. His bills of the last two years specified a 10 percent annual depreciation from 2014 through 2024, lowering the assessed value to zero at the end of the 10 years.
As the inventory now stands, “if they are going to charge 15 percent on a chair, just throw the thing away,” Shirley said in a February interview.
“It never goes to zero” in depreciation, he added. “I’ve had colleagues on the floor say they have desks they’ve paid for for 40 years.”
To sign up for Mississippi Business Daily Updates, click here.
FOLLOW THE MBJ ON TWITTERMy Tweets
Top Posts & Pages
- Alcorn president launches new customer service task force
- NEW IN MADISON COUNTY — Mississippi Bio-Medical Business Collaboratory to be introduced Friday
- David Duval, former British Open winner, joins Sanderson Farms field
- Court rules against Greenwood councilwoman; must give up office
- Cochran continues to reach out to African American voters
- GreenTech holds grand opening of neighborhood electric vehicle plant
- Turner Grain’s bankruptcy will help consolidate lawsuits alleging breach of contract
- Peoples Bank reports quarterly loss due to bad loans
- Senators write letter over Waters of the United States proposal