JACKSON • Mississippi lawmakers are at odds over how to tackle a sweeping income tax elimination plan approved by the House last month: The House wants to jam through the legislation now, before the session ends April 4; but the Senate says pump the brakes.
The Senate on Tuesday refused to consider House Bill 1439, the Mississippi Tax Freedom Act, which killed it thanks to a legislative deadline. Many senators said Tuesday the House proposal was rushed and needs more vetting this summer.
But in the afternoon, the House salvaged its 317-page proposal by inserting the language into a separate bill that remains under consideration heading into the session’s final weeks.
“Unfortunately, the Senate, for now, has punted the ball on the singularly most impactful legislation before us this year,” Rep. Trey Lamar, R-Senatobia, told his colleagues. “It is time for bold action; it is time to continue to fight. The House will continue to push forward with what I believe is the most transformative tax policy this state has seen in generations.”
But Senate Pro Tem Dean Kirby, R-Pearl, noted earlier Tuesday that there are “a lot of very unhappy” groups and individuals related to the House plan. He doesn’t believe anyone in the Legislature fully understands the bill’s implications.
Kirby and other key senators are advocating for a legislative study committee to meet this summer and agree on a revised tax cut plan that could be approved in 2022.
“I want to make a prudent decision; I want to make a well-informed decision,” said Sen. Josh Harkins, R-Flowood, who is advocating for additional research on the House proposal.
The battle over the tax cut plan between the two chambers – both controlled by Republicans – is only the latest of several bitter disagreements this session. Senators were frustrated last week when the House killed a medical marijuana bill the Senate had stayed up until 1 a.m. passing. And members of the House were angered by the Senate’s gutting of its plan to create a fund for conservation and outdoor projects.
“For the Senate to say they have not had time to get on board (with the tax cut plan) is simply not factual,” Lamar said. “They have had time. They have been busy and preoccupied with other things.”
The House income tax plan proposes eliminating personal income tax within approximately a decade and raising sales taxes to compensate. It would cut the grocery sales tax in half, but raise the general sales tax rate from 7% to 9.5%. It also called for higher taxes on liquor, farm equipment, cars and trucks, manufacturing machinery and tobacco products.
The House approved several changes to their original bill Tuesday, however, including removing tax hikes that would have applied to loggers, manufacturers and farmers. Interest groups associated with those industries and others had expressed concerns about potentially negative impacts from the legislation due to sales tax hikes.
“We clearly believe that elimination of the income tax is a good thing for Mississippians,” House Speaker Philip Gunn, R-Clinton, told reporters. “We ought to be looking for ways to make it happen rather than putting up roadblocks.”
Gunn argued a summer study session of the proposal isn’t needed. House leaders, he said, can answer any concerns and questions that Senate leaders bring up in the next two weeks, and there’s no reason to wait.
The plan has widespread support in the House, including from several prominent Democrats. But Harkins noted many senators feel more review is needed. He and others are still sifting through preliminary findings on the proposal compiled by State Economist Corey Miller.
“It came so late in the session, and so many industries are affected,” Sen. Walter Michel, R-Ridgeland, said of the House plan.
Harkins added that more than a dozen relatively new Senate members have never before studied the details of the state’s income tax system. A summer study session would give them time to do so while also nailing down more details of the proposal’s economic impact and allowing for a chance to field concerns from various interest groups.
“Hopefully we’ll come out with a better product,” he said of a study committee. Forming such a joint legislative committee that meets this summer would require passing a resolution this session.
Harkins said he appreciated House leaders introducing the legislation, because it had “stirred the consciousness” of lawmakers about how to remake the state’s tax system.
Sen. Chad McMahan, R-Guntown, told the Daily Journal he worries about the impact of the proposal on Northeast Mississippi retailers, manufacturers and retirees. Retirees don’t pay income taxes anyway, but under the proposal would be subject to the higher sales taxes.
McMahan advocated for holding eight public forums this summer to hear concerns and ideas related to eliminating the state’s income tax. Under his idea, four meetings would be held in central Mississippi, with two each in the northern and southern part of the state.
“It would allow people to come and make comment, allow different organizations and individual taxpayers to come and make public comment, so we can have everybody’s input on this,” McMahan said. “Next year we would come back, after we’ve had nine months to study it, we would take up the House’s current bill, and make amendments that all Mississippians feel like they had a say in.”
Not everyone on the Senate side is convinced delaying is the best course of action, however. Sen. Chris McDaniel, R-Ellisville, said lawmakers should move forward with a modified version of the House tax cut plan this session, especially given that state revenues are healthy.
McDaniel said he is opposed to raising sales taxes to compensate for eliminating the income tax. But the legislation should include certain protections, he said, so that the income tax would only be gradually phased out, and those incremental tax cuts would only occur if state revenue growth targets are met.
“This is that once in a lifetime opportunity to eliminate the income tax, and do it responsibly,” McDaniel said. “It’s a no-brainer.”