Sam R. Hall: Income tax elimination a tough sell in Mississippi

Feb. 28—The general consensus is that the hastily devised plan to eliminate Mississippi's income tax and replace it with higher sales taxes will die from inaction in the Senate.

The reason is simple: The bill's authors — House Speaker Philip Gunn, Speaker Pro Tempore Jason White and Rep. Trey Lamar — essentially wrote it with only minor input from outside experts and without the input from other state leaders, particularly the Senate.

Regardless of what led to the bill, the reality is that eliminating Mississippi's income tax is going to be a tough sell in Mississippi.

Proponents point to states like Florida, Tennessee and Texas, all states that have no state income tax and are flourishing. But those states have key advantages we don't, chiefly an insanely strong business tax base largely tied to a single industry (usually tourism, tech or oil) and an overall stronger base of individual taxpayers that share the various sales tax burdens.

Then there's Kansas, which tried to largely eliminate their state income tax in 2012 only to raise it by $1.2 billion five years later to balance their bankrupting budget. Their cuts were more immediate than the phase-in of tax cuts proposed by the House bill.

Kansas did nothing to offset the loss of state revenue. Then-Gov. Sam Brownback was betting on deep cuts to personal income taxes and a complete cut to taxes on select business profits would spark economic growth. Instead, Kansas saw paltry job growth and deep cuts to vital services, including education and health care.

Gov. Tate Reeves would follow the Kansas model, only phased in. He has advocated for elimination of the income tax while strongly opposing any increase in other taxes. The state economist modeled Reeves' proposal and found it would cause decreases in "real GDP, real personal income, and population for Mississippi" due to declining revenue leading to cuts in state services and public and private sector job losses. (A second study said a complete cut to incomes taxes would lead to just the opposite: growth in GDP, personal income and population. It was commissioned by Empower Mississippi, a conservative think tank that supports the elimination of the state sales tax.)

Again, the House version tries to address what the state economist model shows with steep sales tax increases for consumers and certain businesses. But that presents an entirely new problem, at least in a state like Mississippi, which is the poorest in the nation. Many of the people who will be hit by higher sales taxes don't pay much in income taxes right now. And small businesses will take on an outsized tax burden, particularly farmers and agricultural-related industries.

Hopefully conventional wisdom is correct and the House plan is DOA in the Senate. Such a plan requires much more independent and professional analysis to determine the viability of eliminating income tax in Mississippi.

SAM R. HALL is executive editor of the Daily Journal. Contact him at 662-678-1586, sam.hall@djournal.com or @samrhall on Twitter.