Mississippi residents would enjoy a significant financial boost if they only had a $1 for every time Gov. Tate Reeves advocated eliminating the personal income tax so that the state could compete with Texas, Florida and Tennessee.
“We compete with them every single day for new jobs, and in every instance we are at a disadvantage because they don’t have an income tax and we do,” Reeves said recently.
Reeves wants to eliminate the Mississippi personal income tax within five years.
There are a multitude of ways to compare Mississippi to those three Southern no-income tax states and perhaps to the nation as a whole. And it is no secret that Mississippi lags in comparison to those three states and the entire nation when it comes to wages, health care outcomes and other factors. For instance, Mississippi is last in per capita income and mean household income. Florida, Texas and Tennessee are not in the top 10 in those categories.
The top states in terms of per capita income, such as California, Massachusetts, Connecticut, New Jersey and New York, have a significant tax on income.
Surprisingly, Mississippi outpaces many of those states, the nation, and — gulp — those three no-income tax states in personal income growth, adjusted for inflation, for the calendar year 2020.
In 2020, the nation’s personal income grew by a healthy 5.28% while Mississippi’s grew at an even healthier 6.16%. On the other hand, Florida’s personal income grew by 4.89% while Texas increased by 3.58% and Tennessee grew by 3.77%.
Of the nine states without an income tax, only two — Washington and South Dakota — grew faster in personal income than did Mississippi and the United States.
Granted, 2020 was an anomaly in many ways thanks to the COVID-19 pandemic and the massive influx of federal funds that fueled growth, especially in a poor state like Mississippi where those funds had a greater impact. A study by Pew, a national non-profit foundation that provides research on public policy issues, shows that for many years dating back to 2007, Mississippi’s growth in personal income was fairly anemic — dismal for many of those years. And yes, Texas, which has been a booming economic engine for many years, enjoyed much stronger growth in personal income, according to the Pew study. But so did other states that have an income tax, an income tax much bigger than Mississippi such as California, New York and others.
Numerous methods of measuring economic vitality exist, but personal income growth seems like a reasonable way to do so.
According to Sara Leiseca of Pew, “Personal income sums up residents’ paychecks, Social Security benefits, employers’ contributions to retirement plans and health insurance, income from rent and other property, and benefits from public assistance programs such as Medicare and Medicaid, among other items. Personal income excludes realized or unrealized capital gains, such as those from stock market investments.”
Despite those strong personal income growth numbers Mississippi enjoyed in 2020, it is true, as Reeves points out, that Tennessee, Texas and Florida outpace Mississippi in most areas.
But the bottom line is that Mississippi is at a disadvantage in many areas, not just in tax policy, when competing with those states. Mississippi does not have the tourism options and large cities that Florida has. Mississippi also does not have Nashville, becoming one of the leading cities in the nation, like Tennessee has. And Texas has multiple cities than are larger than our largest city, Jackson, and some of those liberal-leaning cities like Austin offer high-paying tech job options.
Where Mississippi competes directly with Tennessee and wins every day is in DeSoto County — a Memphis suburb.
For decades, DeSoto County has been one of Mississippi’s fastest growing counties, primarily because of people leaving Shelby County in Tennessee, home of Memphis, where there is no income tax, to move across the state line to live and pay that income tax that Reeves so disdains.
According to the 2020 Census, Shelby County grew by 0.2% during the last 10 years. Across the state line in Mississippi, where people have to pay income tax, DeSoto County grew by almost 15%.
People chose to live in DeSoto County and pay the income tax instead of across the state line in Tennessee where there is no income tax.
And in terms of economic development, DeSoto County also is winning against Tennessee — at least according to none other than Gov. Reeves.
“DeSoto County and Mississippi can compete with the best of the best…and win,” the governor said recently on social media.
Maybe, Mississippians could also get a $1 for each time the governor says that.
This analysis was produced by Mississippi Today, a nonprofit news organization that covers state government, public policy, politics and culture. Bobby Harrison is Mississippi Today’s senior Capitol reporter.