Opinion: Mississippi should act quickly to kill state income tax

Competition brings out the best in Americans. In sports, science, business, and yes, even in government.

Our federal system has 50 states competing to provide the best government at the lowest cost. Families and businesses move to states with more competent government and lower taxes. Today there is a 50-state competition to attract investment, new businesses, and workers.

In the past 20 years, millions of Americans have moved from states with high state income taxes to states with no state income taxes.

Mississippi’s leaders have noticed this.

Gov. Tate Reeves and House Speaker Philip Gunn would like to responsibly phase out the state income tax over the next several years. If enacted, this reform would allow taxpayers across the Magnolia State to keep more of their hard-earned money and make Mississippi a much more attractive place to live, invest, do business, and raise a family.

Under the status quo, Mississippi has three income tax brackets: 3 percent, 4 percent, and 5 percent. Having a top rate of 5 percent – the component of the income tax that is most often used to make decisions about investment – is not very competitive.

Eight states do not tax personal income at all. New Hampshire does not tax wage income (and is likely to become a true no income tax state very soon). And 10 more states have top marginal individual income tax rates that are lower than Mississippi’s. No wonder Mississippi’s individual income tax ranks 27th in the Tax Foundation’s 2021 Business Tax Climate Index.

Three of the eight no income tax states are located close to Mississippi, with Tennessee just to the north, Florida to the east, and Texas is the west.

As more and more people and jobs continue to move into no income tax states, more and more states in the Southeast and across the country are looking to put their income taxes on the path to zero. In Arkansas, Lt. Gov. Tim Griffin, a former member of the U.S. House Ways & Means Committee, is committed to making Arkansas a no income tax state.

“Now more than ever before, states are competing with each other: for jobs, for new movers, for skilled workers, and for quality of life,” explained Lt. Gov. Griffin. “That’s why I’m calling for a complete and total phase-out of Arkansas’s personal income tax. Eliminating the income tax will incentivize work and productivity, attract high-quality, good-paying jobs, and unleash Arkansas small businesses.”

Top lawmakers in Louisiana, North Carolina, South Carolina, and West Virginia are also eager to put their income taxes on the path to zero. Unless Mississippi acts quickly, it is likely to look even less attractive in the coming years.

Gov. Reeves and Speaker Gunn understand this. Thanks to Republican legislation signed back in 2016 by Gov. Phil Bryant with the help of then-Lt. Gov. Reeves, the 3 percent bracket is already scheduled to be eliminated by 2022. Now, Gov. Reeves and Speaker Gunn want to build on this success by eliminating the income tax completely.

In his Fiscal Year 2022 Budget Recommendation, Gov. Reeves has proposed phasing out the 4 percent bracket within five years and then, subject to revenue triggers, which are a responsible way for states to provide tax relief without getting ahead of their skis, phasing out the 5 percent bracket by 2030.

“Because this plan is a phased approach, we will be able to ensure adequate funding will be available for education, law enforcement, health care, and transportation priorities,” explained Gov. Reeves. “It will not be necessary for us to increase other taxes in order to make up for lost revenue from the elimination of the income tax.”

Gov. Reeves, Speaker Gunn, and Lt. Gov. Delbert Hosemann have an opportunity to deliver a huge win for all residents of Mississippi by making it the next state to commit to phasing out the job-killing state income tax.

This would make Mississippi much more attractive to investment, bringing new jobs and opportunities to the state. It would allow small business, which file their taxes under the individual code, to have more resources available for jobs and higher wages. And most importantly, it would allow individuals and families to keep more of their hard-earned paychecks.

Mississippi’s future will be brighter if it begins the march to becoming income tax free.

Grover Norquist is president of Americans for Tax Reform.