EDITORIAL/Phase out state income tax
Phasing out the state’s income tax is a goal of Gov. Tate Reeves we embrace.
For the income tax cut to be more than a conservative talking point, it should be approached with thoughtfulness and willingness to learn from other states doing it right including Texas, Florida, Tennessee, Nevada, Washington, New Hampshire, Alaska, South Dakota and Wyoming.
Between 2010 and 2019, Mississippi experienced a 5,601-person growth in population, or 0.19 percent, Russ Latino, president of the conservative think tank Empower Mississippi, pointed out in December. By comparison, the nine states without income taxes have experienced a combined population growth of 8,213,143 for an average of 13 percent.
The best performing states without income taxes when it comes to population are Texas (14.9%), Nevada (14%) and Florida (14%). The worst performing states without income taxes when it comes to population are Alaska and Wyoming, which both have averaged roughly 2.5 percent growth. This low-end growth is more than 12 times the growth experienced in Mississippi. Tennessee to our north has seen a 473,863-person growth in population during this period.
Those questioning the wisdom of the income tax cut while calling for the state to spend more on healthcare, education and public safety are probably Democrats or RINOs (Republicans in Name Only).
They will unfairly point out that if the income tax is phased out the state will rely even more on its 7% sales tax on food and other retail items that many claim is a tax that unfairly burdens the poor. They ignore policies in states like Florida that are prospering. It’s a liberal Democrat argument to spark fear and divide Mississippians by income.
The income tax provides about a third of the state’s general fund revenue or about
$1.9 billion annually. Reeves maintains it can be phased out without raising other taxes or without large cuts to state services and he’s correct — with the right policies.
“Let’s eliminate the income tax, which is one huge speed bump to long-term economic growth and recovery,” Reeves said in November. Republican House Speaker Philip Gunn said he’s open to the discussion.
“We’re trying to find ways to have a more solid and more fair tax structure,” Gunn told reporters in early December.
Republican Lt. Gov. Delbert Hosemann said recently he won’t rush into anything because of uncertainty caused by the coronavirus pandemic and believes legislators should see how the state economy fares the early part of this year. Like a good Democrat, Hosemann talks about the need to fund services and spend more on education.
Mississippi has historically seen slow growth. The individual income tax is one of the largest sources of Mississippi tax collections, and Reeves is bold and ambitious to promote the elimination, but it can be done with the right policies.
During the fiscal year that ended June 30, the state collected about $5.8 billion from all types of state taxes, fees and other sources, including lawsuit settlements, according to the state Department of Finance and Administration. The biggest chunk of money, about $2.2 billion, came from sales taxes. The next-largest source was about $1.8 billion from individual income taxes.
Texas and Florida are on that short list of states without a personal income tax. Tennessee taxes interest from bonds and dividends from stock, but not other personal income. As noted, all of those states have seen significant growth in recent years, while Mississippi has been losing population.
“The more money Mississippi workers can keep in their pockets, the more they can invest in their families, their communities and their businesses,” Latino told the Associated Press. “Increased consumption in the economy drives new jobs and higher wages.”
Latino points out that between 2010 and 2019, Mississippi saw incomes increase by $8,012, good for a 25.93 percent gain. By comparison, the per capita income of citizens in states without income taxes grew by $15,210, good for a 36.5 percent growth rate. The largest increases have occurred in Washington ($22,082), Wyoming ($16,475) and New Hampshire ($16,717). Tennessee to our north has seen a $13,031 increase over this same time period. Notably, this particular measurement is not adjusted for inflation to account for changes in the cost of living.
Latino also points out that Mississippi’s labor force participation rate is just north of 56 percent. By comparison, the nine states without an income tax have a labor force participation rate of over 63 percent, which means a full 7 percent more of people above the age of 16 are employed or looking for employment in those states.
Mississippi has an opportunity under Reeve’s leadership to see solid growth with Americans fleeing high-tax Democrat states that have suffered enormously under overly-strict coronavirus lockdowns.
Indeed, the more money working Neshoba countians can keep in our pockets, the more we can invest in our families, our community and our businesses.