Bobby Harrison: Will your taxes go up when Mississippi eliminates the state income tax?

Yahoo

06-04-2025

House Ways and Means Chair Trey Lamar estimated that the Mississippi income tax will be phased out in 14 years under legislation passed this session and touted by members of the state's Republican political leadership.
Nobody was crowing louder about the phase-out of the income tax than Republican Gov. Tate Reeves. He even went on Fox News to brag about it.
'There are moments in a state's history that mark a turning point,' Reeves said on social media. 'A moment where the past gives way to the future … The elimination of the income tax is not just a win for our economy. It's a win for freedom. A win for families. A win for the idea that Mississippi can lead — that we will lead.'
Reeves claimed victory even though he originally proposed just before the 2025 legislative session began to eliminate the income tax much quicker.
But if Lamar is right, the income tax cut that the Legislature eventually passed and the governor signed into law will be fully eliminated just as the now 50-year-old Reeves nears retirement age.
This is at least a little ironic since for years, Mississippi has not taxed retirement earnings.
But many of those retirees who do not pay an income tax under state law and other Mississippians as well will face a tax increase under this newly passed legislation touted by Reeves and others.
The same legislation that Reeves touts for eliminating the income tax increases the excise tax on a gallon of gas by 9 cents to 27.4 cents per gallon. This will surely represent a tax increase for many seniors, who as stated earlier, pay no income tax. But it also will result in a tax increase for some lower income Mississippians, who pay a limited tax on their earnings because the state's income tax already is so low.
Supporters of the legislation argue that a reduction in the tax on groceries from 7% to 5%, which also is included in the new law, will offset the 9-cent per gallon increase in the gasoline tax.
Each person's situation is different, based on how far they have to drive, the amount and type of food they buy and the income they earn.
But in general, according to information released by legislative leaders, the gasoline tax will bring more revenue to the state — $212 million per year — than the grocery tax cut will take from the state at $128 million per year. It stands to reason more Mississippians will pay more, not less, from the combined increase in the gasoline tax and the cut in the grocery tax.
The group that will receive a windfall from the legislation is the state's most wealthy. For Mississippians earning more than $365,000 annually, they will save more than $40,000 per year, according to the national nonprofit Institute of Taxation and Economic Policy. The savings for the wealthiest Mississippian will be as much as the annual earnings of average Mississippians according to Kyra Roby, a policy analyst for the advocacy nonprofit One Voice.
But these assumptions are based, in part, on another assumption: that the income tax will be eliminated.
Much could happen after Reeves leaves office. A new Legislature and governor — facing possible declines in revenue — could halt or repeal the tax cuts if they faced the option of having to make significant cuts in health care, education and other public services.
And then there is the issue of the bill's flaws. The legislation calls for the income tax to be reduced from a flat rate of 4% to 2.9% on taxable income by 2030. But the rest of the income tax phase-out will be determined by growth triggers placed in the legislation by the Senate to ensure that the income tax cuts would be slowed or even halted for a year if revenue did not meet certain levels.
But typos in the bill, the House leadership and Reeves reasoned, left the triggers at low levels and thus would lead to a quicker elimination of the tax cut. By contrast, some cautioned the language creating those triggers could be interpreted as only reducing the income tax by a minuscule amount each year, meaning it might take much longer to completely phase out the income tax.
In the past, such complex language would go to conference, where House and Senate leaders would take time to ensure the language was correct and did what was intended.
But Reeves and House leaders eschewed that process.
They believed it was more important to pass what may be a flawed bill and tout the elimination of the income tax while leaving the possible consequences for perhaps a whole new group of state leaders.
This column was produced by Mississippi Today, a nonprofit news organization that covers state government, public policy, politics and culture. Bobby Harrison is the editor of Mississippi Today Ideas.