So it comes to a head once again. Earlier this year common sense won over nonsense when the Legislature chose not to fully eliminate personal income taxes. Instead, it moved to phase out the 4% tax bracket plus a few other changes.
Now comes nonsense champion Gov. Tate Reeves once again pushing to eliminate the final 5% bracket.
“Last session the fiscal and the financial environment was right to do exactly that, but unfortunately, the political environment was not," Reeves said at the MEC’s annual Hobnob event. "This session I hope that’s not the case.”
The main change to the political environment is that 2023 will be election year. That’s traditionally when a governor, lieutenant governor, and legislators love to hand out perks and stake out popular positions so voters will keep them in office for four more years.
By anchoring his own re-election prospects to the tax cut, Reeves hopes to pressure common sense champion Lt. Gov. Delbert Hosemann to back his proposal in the upcoming 2023 session. This year it was Hosemann’s Senate that forced the compromise to eliminate only the 4% bracket.
Hosemann still may not go for it. While he touts the state’s excellent financial condition at this time, “inflation is scaring me,” he said. “The possibility of a recession is scaring me.” No one can predict the consequences of surging inflation, the Federal Reserve’s 400% increase in interest rates, and a looming recession can have on Mississippi tax revenues.
To make sure the state retains the financial flexibility to meet its commitments, Hosemann prefers using the state’s surplus to give Mississippians one-time rebates instead of an expensive permanent tax cut.
Personal income taxes and sales taxes each provide about 34% of state revenues. After the 4% bracket is fully phased out, personal income taxes would still provide about 26% of revenues. Eliminating that would require holding state spending nearly flat for the foreseeable future. (Hello inflation.)
Hosemann, however, sees the need to increase spending in areas such as coverage for postpartum care – a prolife issue he says, mental health – too many kept in jails, the adoption system – needs to be easier, and healthcare – help the working poor and struggling hospitals.
The Lieutenant Governor also has his own re-election looming. Outgoing Sen. Melanie Sojourner has made it her mission to ensure Hosemann “never holds office again.” She wants Sen. Chris McDaniel to take him on.
Earlier this year the MEC said business leaders saw no great need to eliminate personal income taxes. They sought greater investments in workforce training, halting brain drain, and infrastructure.
Also in the mix is House Speaker Philip Gunn. He has previously expressed concerns about eliminating the personal income tax without offsetting increases elsewhere.
Common sense says make sure the state can meet its long-term funding commitments before cutting tax revenues. Nonsense says cut taxes first, even if that requires cuts to essential programs.
“Do not let wisdom and understanding out of your sight, preserve sound judgment and discretion” – Proverbs 3:21.
Bill Crawford is a Northsider, living in Eastbrooke condominium complex.
