Good news! Mississippi is going to get a tax break.
Under proposals agreed upon by the state legislature, every worker in our state will be exempt from paying state income tax on their first $18,000 earnings ($36,000 if they are a married couple). At the same time, we will move to a flat tax system, with the 4 percent tax rate phased out and the higher rate lowered incrementally.
As the price of everyday items from gas to groceries skyrockets, it is great to see our state’s leaders taking practical steps to help folk cope with the cost of living.
Letting Mississippians keep more of their own money means that they will have more to spend on themselves, their families and in their own communities. It also means our state will become more competitive.
But while it’s positive that the state income tax is being cut, it should be eliminated altogether.
Today, Mississippi’s state government is sitting on a mountain of money. Besides a $1.2 billion surplus, Mississippi’s state leadership has about another $1.8 billion of federal ARPA (American Rescue Plan) money to allocate. Our state government is sitting on around $3 billion.
Yet only a fraction of that enormous amount is going to be given back to taxpayers in the form of tax breaks. Five sixths of the money mountain is going to be spent on government — perhaps inevitably expanding the size of government in the process. Conservatives should not be excited about that.
Ronald Reagan, the greatest conservative leader of my lifetime, observed how ‘government does not tax to get the money it needs.” Instead “government always finds a need for the money it gets.” I fear that that is what might happen if we do not see further measures taken to eliminate the state income tax.
It is important to praise political leaders for doing the right thing, and cutting the state income tax is certainly a move in the right direction. However, as Mississippi’s conservative think tank, we believe even bolder steps are needed in order for our state to prosper.
Over the past generation, a wave of growth and prosperity has swept the south; except for Mississippi, which has remained one of the poorest states in America.
Why has Mississippi not prospered like other southern states? Because welfare dependency on funds from Washington does not work. If getting handouts from the federal government made states rich, our state would be one of the richest in the Union.
Rather than looking to Congressional appropriations committees to give out wealth to our state, we need far-reaching reforms to make our state the kind of place where wealth is created. That means making ourselves properly competitive. Many young Mississippians are forced to move to Texas, Florida, and Tennessee to find work. It is no coincidence that neither of those three states have any state income tax at all.
Welcoming the new income tax cuts, Governor Tate Reeves reiterated the case for actual elimination. Speaker of the House, Philip Gunn, tweeted that it was just the “bold beginning.” They are right.
Douglas Carswell is the President & CEO of the Mississippi Center for Public Policy.