The Tax Foundation may say Lt. Gov. Tate Reeves and House Speaker Philip Gunn have worked to “create a more neutral, transparent and stable tax policy” as it gives the Mississippi leaders Outstanding Achievement in State Tax Reform awards for the Taxpayer Pay Raise Act.
However, the more liberal-leaning Center on Budget Policy Priorities says that same 2016 act is a flawed policy that creates far more uncertainty than stability. And, the CBPP says, phasing the cuts in, as the 2016 act does, allows lawmakers to dodge responsibility should things go haywire.
The think tank makes an example of Kansas, a favorite target of tax-cut opponents, where steep cuts in income taxes didn't produce the promised economy that would more than make up for the cuts.
“The nearly immediate loss of hundreds of millions of dollars in revenue led to an ongoing fiscal crisis, the use of various imprudent budget gimmicks to hide the damage, and multiple credit-rating downgrades for the state, while failing to give the state economy a meaningful boost,” the authors wrote in the CBPP report.
Mississippi could find itself in the same leaky boat, the CBPP says, when its cuts begin to take effect in 2018. Mississippi over time will cut $415 from the franchise tax and income tax, or 7.4 percent of its revenue, the largest percentage of revenue on the line among the 11 states that are using phased-in cuts.
Making matters even more volatile is the fact that the state's own revenue forecasts have been notoriously wrong of late. And Mississippi only attempts to forecast a year out.
CBPP argues that states planning to phase-in tax cuts over a number of years at least should have revenue projections for those years. Mississippi doesn't.
The tax cuts present a fait accompli to any future policymakers or citizens who might prefer to allocate the higher amount of revenue that would otherwise be available to different priorities.
Center on Budget Policy Priorities
“And without that information, policymakers cannot responsibly evaluate the tax cuts impact on state services,” the CBPP authors wrote. “None of (the 11 states) produced a careful estimate of the cost of providing existing services — taking into account caseload or enrollment changes, inflation, and any pending rule changes — over the tax cuts’ full phase-in period, leaving policymakers in the dark as to whether the tax cuts will force cuts in services.”
The report already finds the state failing to meets its obligations for school funding and has used “rainy day” to close budget holes, a practice that has resulted in Moody's Investor Services giving the state a negative outlook.
The income tax cut won't be fully phased in until 2022, the franchise tax cut not until 2028. Gov. Phil Bryant will be long-gone by then as likely will many lawmakers. Their replacements, though, in CBPP's view, could find their hands virtually tied.
“The tax cuts present a fait accompli to any future policymakers or citizens who might prefer to allocate the higher amount of revenue that would otherwise be available to different priorities,” the CBPP report says. “For example, making new investments in education or infrastructure, expanding the state’s ‘rainy-day’ fund, addressing a long-range fiscal problem (like an underfunded pension fund), or substituting a different type of tax cut.”