JACKSON – Corporate tax collections peaked in Mississippi in fiscal year 2015 at $714.1 million, just as overall tax collections peaked for the state during the same time period.
But the following fiscal year, overall revenue collections from taxes, assessments and earnings on state investments were $34.3 million less than the prior year. It marked only the fourth time for revenue to drop year over year since at least 1970.
The drop in corporate tax collections in fiscal year 2016 was even more precipitous. They dropped $117.8 million or 16.5 percent.
Through December, six months into the 2017 fiscal year, revenue collections remain sluggish. Corporate tax collections continue to bring up the rear – down another $25.3 million or 11.4 percent through midyear.
Overall tax collections are down $52 million or 2.1 percent.
Mississippi’s fiscal year runs from July 1 until June 30. So fiscal year 2015, for example, went from July 2014 until June 2015.
Lt. Gov. Tate Reeves looks at revenue collections differently. He said recently, “We have actually collected more revenue at the state level than we did in the first five months of last year, however, we are continuing to miss revenue expectations and projections.”
For the first five months and the first six months, the same is true. The state has collected more revenue if lawsuit settlement funds garnered by Attorney General Jim Hood and funds that were previously considered special funds designated for specific purposes and not part of the general fund revenue are included in the total collections. Those funds were swept into the general fund by the 2016 Legislature, at least in part, to offset the sluggish revenue collections.
When those funds are included, the state, as Reeves said, has collected more revenue, $45.6 million or 1.8 percent more than the previous year.
But in comparing apples to apples and not including the sweep of special funds into the general fund and not including one-time lawsuit settlement monies, collections are down. And revenue from the taxes on retail items, on personal income and on corporations – which account for about 80 percent of the total general fund revenue – is below the amount collected during the same time period last year.
The result is that Gov. Phil Bryant has had to make two rounds of mid-year budget cuts, with the latest coming last week. Bryant said it was a small cut – $51 million or less than 1 percent of the total general fund.
But it marked the fourth cut made by Bryant over one and one-half fiscal years. In addition, the Legislature made significant cuts during the 2016 session, resulting in multiple programs being eliminated and state employees being laid off. More cuts are anticipated during the 2017 session.
“I strongly recommend that all agencies closely monitor spending and continue to make fiscally conservative budget decisions,” Bryant wrote in announcing the cuts and perhaps warning of more cuts to come.
Democrats, who are in a distinct minority in the Legislature, cite the nearly 50 tax cuts, totaling more than $300 million, as a culprit for the sluggish revenue collections.
“These cuts in services and basic needs in the state will have a dramatic impact on our ability to attract new business and industry here, or have any hope of eliminating the brain drain of our graduates leaving for greener pastures,” said Rep. Jay Hughes, D-Oxford, who said the budget cuts are the result of the tax cuts, particularly to corporations.
A study by the Legislative Budget Committee cites at least $185 million in business tax cuts in recent years, with the largest tax cut in the state’s history, passed during the 2016 session, to be enacted during the next 11 years.
Reeves counters that the corporate tax collections have increased significantly since he took office as lieutenant governor in 2012 – at the same time fellow Republicans Bryant became governor and Philip Gunn became House speaker.
The legislative leadership blames the economy, outgoing President Barack Obama and factors other than the tax cuts for the slowdown in revenue collections. Reeves predicted state revenue collections will improve when Donald Trump is inaugurated as president.
Plus, the legislative leadership and Bryant have consistently argued that in the long run, the tax cuts will be good for the state.
“I’m looking for policies that grow the size of the state’s economy, and I believe this proposal will lead to long-term economic growth,” Reeves said of the proposal passed in 2016 that will reduce taxes $415 million (in today’s dollars) over the next 11 years.
Time will tell if such actions improve the state’s economy. But for whatever reasons, state revenues are sluggish right now.
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