JACKSON – The impact of the Taxpayer Pay Raise Act, the largest tax cut in Mississippi history, will begin with the new fiscal year starting July 1 just as intended when passed during the 2016 legislative session.
Since its passage, legislative Democrats have tried unsuccessfully to halt or at least postpone the tax cut legislation.
During a legislative special session earlier this month, Senate Democrats, led by Bill Stone of Holly Springs, offered an amendment to postpone the beginning of its phase-in by one year.
Stone said the proposal would allow legislators “to catch our breath for a minute and see where we are with the tax cuts.”
Under the 2016 legislation, the tax cuts for businesses and on personal income will reduce general fund revenue by $415 million (in today’s dollars) over a 10-year period.
The first year the impact on state revenue is projected to be $18 million, for the fiscal year beginning July 1, and nearly $50 million for the fiscal year beginning July 1, 2018.
Stone’s amendment would have postponed the start of the phase-in to July 1, 2018, thus costing the general fund $18 million for that year and nothing for the upcoming fiscal year.
Lt. Gov. Tate Reeves, who presides over the Senate and is the chief architect of the tax cut plan, ruled the Stone amendment was “not germane” to the bill he tried to amend. That ruling prevented Stone from being able to offer his amendment.
The bill Stone was trying to amend was Gov. Phil Bryant’s Financial and Operational Responses that Invigorate Future Years Act (FORTIFY) designed to make changes to the state’s budgeting process to address concerns of the nation’s credit rating agencies. The biggest change in the FORTIFY Act is to increase the cap for the Working Cash Stabilization Fund, commonly known as the rainy day fund, from 7.5 percent of the current year’s general fund appropriation to 10 percent.
Stone and Democrats argued one of the primary reasons for the concerns expressed by the credit rating agencies is Mississippi’s sluggish revenue growth. Democrats cite the multiple tax cuts passed in recent years that cost the general fund more than $325 million annually as the reason for the sluggish revenue collections.
Those tax cuts are in addition to the Taxpayer Pay Raise Act – the largest in state history – that has yet to have an impact on the general fund.
Reeves and other supporters of the tax cuts say in the long run they will be good for the economy.
“I don’t think revenue in any one day, or any one month, or quite frankly, any one year ought to determine long-term tax policy,” Reeves has said. “What we should do is we should create long-term tax policy that makes economic sense for our state.”
Stone argued unsuccessfully his proposal to push back the tax cuts was germane because the purpose of the FORTIFY Act is “to solidify our standing with the rating agencies” and that is what his proposal would do.
Of the tax cut, Standard and Poor’s credit rating agency said, “The fiscal analysis also projects the tax changes are likely to reduce state employment levels for an overall negative net effect on employment across the state.
“In addition to the projected revenue loss, we believe the implementation of tax changes could affect the timing and volatility of state revenue collections.”
Thus far Bryant has not signed two bills from the special session – the FORTIFY Act and another allowing the state to sweep about $10 million in fees and assessments into the general fund.
He has until Friday to sign them.
The other bills taken up during the special session, including budgets for the office of Attorney General, for the Department of Transportation and for the state Aid Road Program, have been signed into law.