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Study finds state’s revenue growth slowing


Despite the fact that Gov. Phil Bryant and legislators have been struggling with declining tax revenue and budget cuts, Mississippi is one of 29 states where collections, when adjusted for inflation, have rebounded to new peaks since what is known as the Great Recession of 2008-09.

A report by the Pew Charitable Trust, released earlier this month, reveals that overall states took in 6.5 percent more when adjusted for inflation at the end of calendar year 2015 than they did “in the third quarter of 2008 before receipts plunged in the recession, after accounting for inflation and seasonal fluctuations.”

The growth in Mississippi, though, was on the low end at only 2.7 percent, but above that of neighboring Alabama, which saw a decline of 5.3 percent, and Louisiana, which saw a dip of 20.9 percent after massive tax cuts and declines in the price of gasoline. The lower gas prices have impacted oil producing states like Louisiana and, some say, to a lesser extent Mississippi. Mississippi’s other two border states, Tennessee and Arkansas, both saw healthy gains of 9 percent.

The Pew study says of the 29 states that saw increases from their pre-recession peaks adjusted for inflation, eight of them actually saw declines in the final quarter of 2015 – the last time period that Pew calculated. Mississippi was among those states seeing declines late in 2015.

The Pew study matches up with what has been occurring in recent months in Mississippi in terms of actual tax collections.

The state ended the past fiscal year collecting less in revenue ($32.9 million or 0.61 percent less) for only the fourth time since 1970 and for the first time when the nation was not in a recession. The state saw two years of steep declines during the 2008-09 recession.

Through the first two months of the current fiscal year, Mississippi collections are $11.5 million or 2.9 percent below the amount collected during the same time period the prior year.

Mississippi Democrats, now in a distinct minority, see the declining revenue collections and ensuing budget woes as a political opening. They blame the budget and revenue problems on a sluggish economy and more than $300 million in tax breaks over the last five years. In addition, legislation passed in the 2016 session will reduce taxes an additional $415 million (in today’s dollars) during the next 11 years.

“Democrats have warned that 40 tax cuts over the past few years would get us to this point, a budget mess,” said Bobby Moak, chair of the state Democratic Party in an email. “This has led to dipping into the rainy day fund, using one-time money to balance the general fund, and watching our credit rating diminish.”

On social media recently, House Pro Tem Greg Snowden, R-Meridian, pointed out the revenue decline this year has been in collections on the retail sales tax and personal income tax, which account for about 70 percent of total state revenue.

Democrats have been specifically hammering the Republican majority for corporate tax breaks. Corporate tax collections are actually up for the first two months of the fiscal year $5.8 million or nearly 22 percent. But corporate tax collections were down $117 million or 16.5 percent for the last fiscal year.

Lt. Gov. Tate Reeves, a leading advocate for many of the tax cuts, said their long-term effect will be good for the Mississippi economy.

“I believe our goal should be to make Mississippi the most competitive place in America to invest capital and to provide for more and better paying jobs,” he said.

He cites as the reason for the revenue downturn “a reversion to the mean.” Mississippi had two strong years of revenue growth (more than 5 percent each year) when rebounding from the recession and now collections are just returning to their normal level.

Plus, he said many states are experiencing similar revenue woes.

Pew found that revenue dropped at the end of 2015 – the last where comparative data was available for the study – in 16 states, including Mississippi.

“Besides a steep drop in energy prices, other reasons for the tax declines included a weak stock market, state tax cuts or growth that was slower than inflation,” the report found.

The report goes on to add “among states in which tax revenue has recovered, some such as California and Minnesota raised taxes after the recession, contributing to gains. Among states in which receipts remain below the previous peaks, some such as Florida, Kansas and Ohio chose to cut taxes.”

The coming months – and years – will provide the answer to how the tax cuts have impacted Mississippi.


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