Mississippi could cut its income tax almost in half over the next five years while lowering the grocery tax and raising the gas tax under a plan the Mississippi Senate Finance Committee advanced on Feb. 20.
In its first year of implementation, Senate Bill 3095 would cut income taxes by $56 million and eliminate $127 million in grocery taxes. With estimated annual revenues of $70 million from the fuel tax increase, the cuts would amount to $326 million over the first five years.
“It provides instant tax relief for Mississippi citizens, and I would say it’s a responsible management moving forward on how we reduce taxes on Mississippi working families,” one of the bill’s sponsors, Sen. Josh Harkins, R-Flowood, said when introducing the legislation at a Senate Finance Committee meeting on Feb. 20.
Mississippians who make more than $10,000 in a calendar year would go from paying an income tax rate of 4.7% in 2024 to 2.99% in 2030 under the Mississippi Senate’s tax reform plan. The income tax would decrease by 0.25% each year until 2030. Senate Bill 3095 says the Legislature would review the income-tax rates before 2030 to determine if it should make any additional tax cuts.
“The big winners under this, apart from out-of-state corporations, are people with high incomes, and they don’t spend money,” said Mississippi Sen. Hob Bryan, D-Amory, who opposed the bill.
Mississippi’s grocery tax, which is currently the highest in the nation among the 12 states that tax groceries, would drop from 7% to 5% starting on July 1, 2025, under the Senate’s plan. The tax cut would not apply to alcohol, beer or light wine.
The proceeds from the state’s grocery tax currently go to municipalities, education, infrastructure and the state’s general fund. Harkins said S.B. 3095 would increase the percentage of diversions from the grocery tax so that agencies’ budgets would not decrease.
“Nobody should see a diminished value in their budget based on the grocery (tax) going from 7% to 5%. The state is making up that difference. So, the School Ad Valorem Tax (Reduction Fund), Educational Enhancement Fund—all those funds are made whole by the change in diversion in, specifically, the grocery tax area,” he said.
Section 3 of S.B. 3095 says that any municipality that has more than 150,000 residents can impose a “special sales tax” of no more than 1% of the “gross proceeds of sales or gross income of the business” for any activities that have a tax rate of 7% or more under the Mississippi sales tax law. The capital city of Jackson is the only Mississippi municipality with more than 150,000 residents.
But before Jackson could implement the special tax, the mayor and city council would have to “adopt a resolution declaring its intention to levy the tax”, set the amount of the tax imposed, explain how the city would use the tax revenue, set the start and repeal dates for the tax, and a call to host an election for voters to affirm or deny the new local sales tax.
Increasing the Gas Tax
The gas tax would increase under S.B. 3095 from the current 18 cents per gallon to 21 cents per gallon on July 1, 2025, and would increase by three cents per gallon yearly until reaching 27 cents per gallon in 2027. Under the bill, Mississippi would adjust its gas tax every other year to reflect the percentage change in the yearly average of the U.S. Federal Highway Administration’s National Highway Construction Cost Index starting on July 1, 2029, and the tax increase would not be above one cent per gallon of gas every other year. The same taxes would apply for dyed and undyed diesel fuel under the bill.
“I’m perplexed at everyone out here promoting tax cuts and crying and hollering and slinging snot about tax cuts, tax cuts, and every single one of them seems absolutely determined to drive up the cost of gasoline at the pump,” Sen. Hob Bryan said in a Senate Finance Committee meeting on Feb. 20.
The Office of State Aid Road Construction and the State Highway Fund would continue to split revenue from the first 18 cents of the gas tax, with 16 cents per gallon going to the Office of State Aid Road Construction and two cents per gallon of the gas tax would go to the State Highway Fund “to be used exclusively for the construction, reconstruction and maintenance” of Mississippi highways,” S.B. 3095 says.
Revenue garnered from the gas tax that exceeded 18 cents per gallon would go to the Office of State Aid Road Construction, the Strategic Multi-Modal Investments Fund and the Mississippi Department of Transportation, the legislation says. MDOT would get 74% of the amount for improving highways and bridges; the investments fund would get 2.75% and the road construction office would get 23.25% of the proceeds under S.B. 3095.
“So, essentially over three years, we’re doubling the amount of state aid road funds that our counties are getting, and we’ll be able to utilize state aid roads,” Harkins said.
The Senate Finance Committee voted to pass S.B. 3095 out of committee. It is headed to the Senate floor for consideration.
Failed Tax Plan Amendments
Sen. Hob Bryan argued that the proposal to cut Mississippi’s income tax would put the burden on Mississippi’s working families while helping out the wealthy elite from out of state. Sen. Josh Harkins disagreed.
“While it may not be only tax policy, it’s tax policy coupled with regulation and things that induce people to move into the state,” the Republican senator said. “But it’s part of the equation, and I think that’s the effort that we’re all trying to get here.”
Bryan proposed a strike-all amendment to S.B. 3095 that would have cut the grocery tax in half while keeping the current income tax and gas tax rates. Bryan said he wanted to divert 4% from sales tax, use tax, corporate tax and personal income tax to the Mississippi Department of Revenue “just like it was fuel tax.” He said a gas tax “is not a sustainable way to fund highways.”
Under his plan, $335 million would go to the Mississippi Department of Transportation for highway construction to “cut everybody’s grocery taxes in half,” costing the state’s general fund $560 million a year—the same amount of money it would cost the state under S.B. 3095.
“There is no, no, no evidence at all that cutting income taxes has any positive effect on a state’s economy,” Bryan said. “None at all. … One of the absurd things that we hear is that if Mississippi did not have an income tax, people would move here for that reason. There may be a handful of people that do that, but people don’t move places based on tax policies.”
The Senate Finance Committee voted against adopting Bryan’s amendment.
Sen. Derrick Simmons, D-Greenville, brought forth an amendment to eliminate the grocery tax and keep the current gas tax rate while adjusting the tax diversions to help municipalities. The committee also voted against adopting Simmons’ amendment.
Shipping Out-of-State Wine to Mississippi Doorsteps
Mississippians may soon be able to purchase wine from out of state and get it delivered to their doorsteps under a bill the Mississippi House and Senate passed. Mississippians could get up to 12 cases of nine-liter wine bottles per household yearly, Senate Bill 2145 says.
Licensed out-of-state wineries would need to apply for a direct wine shipper’s permit from the Mississippi Department of Revenue to participate in the program S.B. 2145 would create. Wine made or sold in Mississippi does not qualify for the program under the legislation.
The bill’s author, Sen. Jeremy England, R-Vancleave, said 47 other states have an out-of-state wine-shipping program. Residents in dry counties could not order wine to be delivered to their doorsteps, he said.
“Oddly enough, it’s something that we allow our native Mississippi wineries and meat producers—we allow them to ship directly to consumers outside of Mississippi, but we don’t allow that here in Mississippi until this bill passes,” the senator said at a Senate Finance Committee meeting on Jan. 30.
When a delivery driver drops off the package of wine, the legislation says a person in the household who is 21 or older must present their photo identification and sign for the package. Direct wine shippers must label the packages with the words “Contains alcohol: signature of person age 21 or older required for delivery,” S.B. 2145 says.
Wine deliveries would have a 15.5% tax, with 3% of the tax going to the Alcoholism Treatment and Rehabilitation Fund—a fund that the Division of Alcohol and Drug Abuse in the Mississippi Department of Mental Health uses to educate residents about substance abuse.
Direct wine shippers must report the total amount of wine by type that was sold and shipped to the Mississippi Department of Revenue each quarter and maintain those records for three years under the legislation.
The Mississippi Senate passed the bill by a 24-14 vote on Feb. 14 after the bill failed to reach a three-fifths majority vote on Feb. 13 and senators entered a motion to reconsider. The House passed it by an 80-29 vote on Feb. 18. It heads to Gov. Tate Reeves’ desk.
