JACKSON, Miss.— Mathematical errors in the Mississippi Legislature’s tax-reform plan could mean that Mississippi abolishes the income tax much sooner than intended without first meeting significant economic growth targets.
House and Senate leaders say another bill, Senate Bill 3095 could serve as a vehicle for any changes the Legislature needs to make to fix the tax-reform plan, House Bill 1.
Mississippi House Speaker Jason White, R-West, said if the Legislature cannot fix the errors in the income tax bill this year through S.B. 3095, lawmakers can work on it another year.
“And certainly, for four years, we don’t have to deal with the trigger anyway, so conceivably you will certainly have other leadership in place in maybe all these (positions). So, new faces could address it if this current body is unable to this session,” he told reporters on March 24.
Mississippi Senate Finance Committee Chairman Sen. Josh Harkins, R-Flowood, explained on the Senate floor on March 17 that Mississippi would slowly abolish the income tax by reducing it annually from the current 4.4% until the tax rate reaches 3% in 2030.
Harkins said that if the State’s surplus in revenue from the previous year was greater than 85% of $407 million, the State would further reduce the income tax by 0.20% starting in 2031 under the plan; by 0.25% if the surplus was 100% of $407 million; and by 0.30% if the surplus was over 115% of $407 million. The cycle would continue annually based on economic growth until the income tax was completely eliminated, he said.
But the Senate’s amendments to H.B. 1 on page seven instead said the State would reduce the income tax by 0.20% if the State’s surplus in revenue was greater than 0.85% of $407 million instead of 85%. That error would mean that instead of the State having to reach a $345.95 million surplus, its revenue would only have to meet a $3.45 million surplus for the State to lower the income tax by 0.20% each year after 2030.
The same errors repeat in the next subsections of the legislation. If the State’s surplus in revenue was 1% of $407 million, the legislation says the State would reduce the income tax by 0.25% after 2031—requiring the State to have to meet a $4.07 million surplus instead of a $407 million surplus. If the State’s surplus is 1.15% of $407 million after 2031, the State would reduce the income tax by 0.30% and would have to reach a $4.68 million surplus instead of a $468 million surplus.
Compromises in Senate Bill 3095
Senate Bill 3095, which was originally the Senate’s tax plan before the two chambers agreed to the amended House bill, can serve as a vehicle for any modifications or amendments to House Bill 1, the Republican leaders of both chambers told reporters separately days after the House and Senate passed H.B. 1.
“Make no mistake, as you probably have already known and pointed out, there is a vehicle in Senate Bill 3095 to address it, and we are more than willing to sit down and have conversations about what a reasonable trigger looks like,” Mississippi House Speaker Jason White, R-West, told reporters on March 24. He said he learned of the errors on March 19, the day before the House passed the amended version of H.B. 1 by a 91-27 vote and two days after the Senate passed it by a 32-16 vote.
Hosemann was less receptive to reporters’ questions about the errors in the legislation.. Instead of discussing the errors, he said he wanted to focus on the Legislature’s success at passing the tax reform bill, which includes a grocery tax reduction from 7% to 5%.
“I expect that, whatever the correction is, it’ll be in there if there is a correction. But I want to tell y’all something that’s really important: Today is about the biggest win we have had on these issues in the history of this state. Now, if we need to clarify something, they’ll clarify it,” Hosemann told reporters on March 21, before reciting what the overall legislation does. “… So, I think we’ve done so many positives. I don’t want to take any of the glow from this House or the Senate by the work that we did for a year here by whatever clarifications are needed.”
White said Senate leadership had told House leadership that senators would not be willing to further amend or compromise with the House on the tax plan partly because the Senate struggled to get a majority of votes to approve the amended version of H.B. 1. The House speaker said the House Republican caucus was hoping to use S.B. 3095 to negotiate a “reasonable” trigger as well as a way to make compromises on other issues House leadership wanted to address in H.B. 1, including a designated stream of funding for the Public Employee Retirement System and a modified version of a fifth tier for PERS.
He also said that since the House’s No. 1 priority was to abolish the state income tax, he did not want to drag out the elimination timeline using thresholds that were too high for the state’s revenue surplus to meet realistically.
“I can tell you we wouldn’t be interested in the triggers revisions if they are going to mimic what some people say (the Senate) intended to do the first time. We don’t want cumbersome triggers. We don’t want to pretend like we’ve eliminated the income tax and have a situation where the bar is so high you never hit the trigger. I’m not saying that was their intention,” White told reporters on March 24. “If what some people are saying they intended to do it would appear that would be a very high bar, so we’re not interested in that. It was the House’s No. 1 priority, which is elimination of the income tax.”
Republican Governor, House Democratic Caucus Chairman Respond to H.B. 1
House Democratic Caucus Chairman Rep. Robert Johnson, D-Natchez, criticized Republican leadership for allowing the erroneous income tax trigger to remain in the bill. He told reporters on March 21 that “10 or 12” Republican members of the House spoke to him after he pointed out the errors in the legislation on the House floor on March 21.
The Democratic leader told reporters later that day that those Republicans claimed they felt misled into voting yes on the legislation because they thought further negotiations would happen and “never thought this (bill) would go straight to the governor.” He did not mention who those Republicans were, however.
He also spoke out against the idea of abolishing the state income tax without a plan to make up for lost revenue at a time when the Trump administration is slashing federal funding; Mississippi gets 47% of its budget from the federal government.
“We depend on federal funds more than anybody in the country and to know that the president is cutting those funds, and you turn around and cut them even more and then try to cover it by saying you’re helping programs like the retirement system is just irresponsible, and it’s actually just dishonest. It doesn’t do what people think it does,” he told reporters on March 21.
The Legislature has sent H.B. 1 to Gov. Tate Reeves, who has indicated on social media that he will sign the bill into law by the March 31 deadline. He also criticized journalists for publicizing the errors in the legislation.
“In Mississippi over the last 24 hours some liberal activists (mostly the ones that masquerade as journalists) are making claims of errors, omissions, mistakes, and changes that need to be made to HB1—the bill that eliminates the income tax,” Reeves said in a March 22 tweet. “But when I read Lt. Gov. Hosemann and Speaker Jason White’s comments on our decision to finally end the tax on work, I agree that we are ‘Building up Mississippi’ by furthering ‘our competitive advantage’ and that HB1 is ‘a defining moment in Mississippi history.’ The only thought that comes to my mind is that HB1 is one big beautiful bill!”
Comments are closed.