Mississippi phasing out income tax, reducing tax on grocery sales

Republican Mississippi Gov. Tate Reeves ratified legislation Thursday eliminating the individual income tax in his state by 2037 through annual decreases. The bill also decreases the tax on grocery sales from 7% to 5% and raises the gas tax by 9 cents over three years.

“Mississippi will no longer tax the work, the earnings, or the ambition of its people,” the governor said in a statement. “The legislation I’m signing today puts us in a rare class of elite, competitive states. There are only a handful of states in the country that do not tax income. Today, Mississippi joins their ranks — and in doing so, we plant our flag.”

Up until now, Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming were the standout states that refused to confiscate wealth from Americans in the form of income taxes. While New Hampshire still taxes investment and interest income, it is presently in the process of phasing those out.

Mississippi House Bill 1, the “Build Up Mississippi Act,” will reduce the income tax from 4% to 3.75% in 2027 then down to 3.5% in 2028, 3.25% in 2029, and 3% in 2030. There will be annual decreases in the following years until the income tax falls to 0%.

‘This is a transformation.’

House Minority Leader Robert Johnson III (D) suggested that a typo in the trigger language of the act may, however, actually move up the time schedule for abolishing the income tax, reported WJTV-TV.

“The trigger is actually no longer a trigger because at the 80/500 of a percent, we essentially are in tax cut mode right now,” said Johnson, who voted against the bill.

The Mississippi Free Press reported that lawmakers were under the impression that the tax would be further reduced in 2031 if the state’s surplus in revenue from the previous fiscal year was greater than 85% of $407 million. The legislation as enacted instead states that the reduction will be triggered if the state’s surplus that year is greater than 0.85% of $407 million.

Mississippi House Speaker Jason White (R) noted that one way or another, the legislation “eliminates the income tax in as soon as 14 years. While that’s not fast enough for some, the House plan was a little faster than that — 11 years.”

When the Mississippi legislature passed HB1 by a vote of 92-27 on March 20 — where all opposed were Democratic lawmakers — National Federation of Independent Business director Leah Long stated, “This is great news for Main Street businesses.”

‘Government should take less so that you can keep more.’

“Most small businesses in the state are structured as pass-through entities, meaning the revenue passes through the business to the owners, who pay taxes at the individual rate,” said Long. “Eliminating the state income tax will allow small business owners to reinvest more revenue into their businesses, create jobs, and support their communities.”

The Republican Governors Association called the ratification of HB1 a “historic achievement.”

“This is more than a policy victory,” said Reeves. “This is a transformation. And it’s a transformation that I have believed in, fought for, and worked toward for many years.”

“I believe in a simple idea: that government should take less so that you can keep more. That our people should be rewarded for hard work, not punished. And that Mississippi has the potential to be a magnet for opportunity, for investment, for talent — and for families looking to build a better life,” added the governor.

While Reeves and other Republicans suspect that the elimination of the tax will lure talent and investment to the state, some critics claim Mississippi’s prosperity might be at stake.

Kyra Roby, the policy director of the leftist activist outfit One Voice, noted in a recent op-ed that the loss of the $2.1 billion that Mississippi’s income tax nets the state annually “would severely impact funding for education, healthcare, roads, and other vital services.”

Roby also complained that the tax cut would save wealthier people more money, claiming that “disparities could worsen.”

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