Jackson, Miss. (Northside Sun) – The debate about tax cuts within the Mississippi Republican Party is getting pretty interesting.
House Speaker Philip Gunn, with supposed aspirations for higher office, wants to blow it out of the water with what he has said, and possibly accurately so, would be the largest tax cut in state history.
Lt. Gov. Delbert Hosemann, who appears to have no higher ambitions than the state’s No. 2 job, has adopted a more conservative approach, looking to cut roughly one-fifth as much as Gunn.
We are not convinced the state can afford for the long term either one of these plans. But if we had to choose between the two of them, the plan in Hosemann’s Senate is obviously the way to go.
The current surpluses that have provided the latest rationale for tax reductions in the Legislature are going to be short-lived. Those surpluses are the result of the massive amounts of money Congress has funneled to individuals, businesses and state and local governments over the past two years to stave off the threat of economic collapse posed by the COVID-19 pandemic.
When those dollars stop coming, and they will since they have also produced the worst inflation in four decades, Mississippi’s economy will return to normal. And normal is moderate growth at best, interspersed with periodic slumps. That’s definitely not a track record on which shutting off about a third of the state’s tax revenue stream can be justified.
What should make everyone nervous about Gunn’s proposal, already passed by the House, is that it is counting on a continued economic boom to pay for the cuts. If that doesn’t happen, Mississippi would be looking at huge shortfalls, which would require either substantial reductions in current spending or tax increases elsewhere.
Sure, Gunn’s proposal has a trigger that suspends some of the phased-in reductions if the economy doesn’t expand as fast and as far as hoped, but that restraining mechanism does not kick in for two years. In the meantime, according to the Legislative Budget Office’s projections, if the growth that Gunn is counting on doesn’t occur, by the second year of his plan the state would be experiencing a $250 million shortfall, and shortfalls would continue for the next three years.
Of course, projections are just educated guesses. They can be wildly wrong in either direction. Fiscal prudence — a trait in which most Republicans used to take pride — demands that whatever is done, it should assume the worst-case scenario, or at least not the best-case one.
If that were the lens through which lawmakers viewed the future, the best course might be to take one aspect of the Senate plan — a one-time tax rebate — and discard everything else.
Mississippi is experiencing a windfall, just like it experienced during past calamities that produced a dramatic but temporary infusion of federal dollars. If lawmakers feel compelled to share some of the current windfall with the taxpayers, they could do it with a rebate — that is, matching nonrecurring revenue with a nonrecurring tax reduction for one year. And if the following year’s treasury is just as flush, they can do the same in 2023.
But locking themselves into permanent tax cuts that will be politically difficult to rescind is destined to create problems in a state that often leaves many needs unmet because of a lack of revenue.