Mississippi leaders intent on tax cuts

JACKSON -- Even with state revenue collections sluggish, raising the specter of mid-year cuts to state agency budgets, Mississippi's political leadership apparently is still eyeing possible tax cuts during the 2016 session.

Both Gov. Phil Bryant and Lt. Gov. Tate Reeves, who presides over the Senate, indicated in recent comments that they would support tax cuts in the 2016 session, which begins in January.

Eyes on franchise tax

In an emailed response to a question, Knox Graham, a spokesman for Bryant, said the governor "cut taxes 49 times during his first term in office and that number is sure to go up over the next four years. As for this year's session, he is extremely interested in doing away with the franchise tax."

During the 2015 session, Reeves was the first to introduce a plan to phase out the franchise tax, which is a tax on a business's property used, invested or employed. The state collects about $245 million in the franchise tax, according to the latest numbers.

The elimination of the business franchise tax during the 2015 session was part of packages that also included reductions in the personal income tax. Reeves' original proposal last session would have reduced state revenue collections by about $400 million annually when fully enacted. A later proposal offered by Reeves would have been about a $550 million hit to the state general fund when fully enacted.

Those proposals, as well as a plan by the House leadership to completely eliminate the personal income tax (accounting for about 30 percent of the total state general fund) over a period of years did not make it through the legislative process during the the 2015 session.

Better chance for cuts

But with Republicans, who have been the primary advocates for tax cuts, growing their numbers in the Legislature thanks to the Nov. 3 election, most believe tax cut proposals will stand a better chance of passing in the 2016 session.

It is no secret that Reeves still is eying tax cuts. Reeves recently said he was developing an agenda for the 2016 session and was not ready to release it.

But he said, in an emailed response, "I believe Mississippians make better decisions on how to spend their own money than any governmental entity ever will. I also believe this is not an either/or decision but a both/and decision. We can continue to grow our economy through both strategic investments in infrastructure and education, and putting more money in the hands of hard-working Mississippians.

"Mississippi needs a tax code that encourages capital investment and economic growth, not one that discourages it."

Most believe the elimination of the business franchise tax will be a prominent piece of Reeves' legislative agenda.

Reeves and others say that Mississippi is one of the few states with a franchise tax on business, and it needs to be eliminated to help ensure the state is competitive in economic development efforts. Others say the franchise tax is needed to offset the fact many companies that do business in the state do not pay an income tax.

Sluggish revenue

Many blame the 49 tax cuts cited by Bryant during the last four-year term as the reason for the current sluggish revenue collections.

In an email to supporters, Parents Campaign Executive Director Nancy Loome, who lobbies for full funding of public education, said, "Each year, the Mississippi Legislature exempts corporations from paying hundreds of millions of dollars in taxes they should owe our state. Now all state services, including schools, could find their budgets on the chopping block as revenue comes up short."

More than $300 million in tax breaks and tax credits were approved by the Legislature and signed into law by Bryant during the last four-year term.

These included changing the method of calculating taxes for businesses, which is estimated to save them about $100 million, providing sales tax breaks for developers to build malls and providing a sales tax holiday for the purchase of hunting equipment.

The largest of the tax breaks is a reduction in the tax on business's inventory, which is estimated to have a $126 million impact on the state general fund for the upcoming fiscal year, which starts July 1.

Impact unknown

But the impact of most of the legislation passed during the last four years is unknown -- meaning Department of Revenue officials were unable to estimate the impact it would have on state revenue collections.

The impact of most of those tax cuts, such as exempting the sales tax on certain fuels for airplane use, is expected to be minimal. But many have said passing multiple bills that have a minimal impact on revenue eventually adds up to a significant impzact.

Reeves said the tax cuts will result in more money to spend and eventually increase state revenue collections.

That issue most likely will be debated extensively during the 2016 session.

This story was originally published November 29, 2015 at 8:35 PM with the headline "Mississippi leaders intent on tax cuts ."