Tupelo, Miss. (Daily Journal) – A new analysis from state economists says that if lawmakers adopt a tax cut plan being pushed by House leaders, private employment would increase, but a large revenue shortfall would loom over state government.
Corey Miller and Sondra Collins, two state economists , released an analysis on House Bill 531 predicting that the state’s gross domestic product and private employment would increase but that net revenue and overall employment would fall sharply over the next 13 years.
“The long term impacts to the economy were positive, but relatively small in terms of GDP and private employment and personal income,” Miller told the Daily Journal. “We think it can have some positive effects, but those are relatively small because I would maintain Mississippi’s income tax is not a particularly high tax.”
The analysis also predicts that the decrease in state revenue would lead to fewer state government jobs, leading to a decline in jobs, a net decrease in population and an overall loss in personal income.
The House tax plan phases out the income tax completely, decreases the grocery tax and raises the sales tax. Senate leaders have argued the House plan would erode revenue and hamper some government services.
Using data from the Mississippi Department of Revenue and historical trends, the analysis says the House tax plan would decrease net revenues by more than $278 million in the first year it goes into effect and around $679 million the second year. The deficit would continue to grow each year.
The analysis notes that the state has $1.092 billion in its capital expense fund that it could use to plug the revenue gap, but legislators would have to agree to spend those dollars on general fund expenses.
The report also predicts that by Fiscal Year 2035, there will be a net decrease in revenues of $1.075 billion.
Republican House Speaker Philip Gunn’s office argues that the analysis shows the state will not dip under $6.5 billion in revenue, which they say will sufficiently cover government expenses.
The analysis comes right in the middle of a legislative session where the Senate has also introduced a tax cut plan, setting up a legislative battle where political leaders don’t appear to be budging.
The Senate’s proposed plan would eliminate the 4% income tax bracket over a four-year period. The grocery tax would immediately be reduced from 7% to 5%. The plan would also do away with state fees enacted on car tags.
Lt. Gov. Delbert Hosemann told members of the media on Wednesday that he does not support the House plan because it raises the sales tax and he does not favor any tax plan that raises any type of tax.
“I think we have needs in education, health care and infrastructure, particularly roads and bridges,” Hosemann said. “I’m hearing from my people a lot. I think there are other ways to spend the funds.”
The House plan has also faced some skepticism from business leaders since Gunn introduced it last year, but he and other House leaders say they’ve tweaked it to address some of their concerns.
Leaders from the Mississippi Economic Council — essentially the state chamber of commerce — held a press conference at the Capitol to encourage legislators to adopt policies that would equip Mississippians with proper workforce training.
The MEC leaders at the Wednesday event released a report based on survey results that details all of the major concerns that business leaders across the state have about retaining an educated workforce
The MEC report says “…the Mississippi tax environment was not high profile nor ever discussed significantly as a priority.”