Mississippi House approves massive tax bill with transportation funding help
A massive tax overhaul in Mississippi is halfway through the statehouse. The plan includes a significant increase in transportation funding.
House lawmakers voted 88-24 to advance a 107-page bill that would cut certain taxes and add tax revenue and other funds elsewhere in the state budget.
Sponsored by Rep. Trey Lamar, R-Senatobia, the main component of the bill is the elimination of the state’s individual income tax over the next decade. Passage of HB1 would result in a $2.2 billion cut to Mississippi tax revenue.
Lamar said phasing out the state income tax is a component to alleviate the financial strain on Mississippians and “create an environment ripe for robust economic growth.”
Gov. Tate Reeves has indicated support during his term for eliminating the income tax. The Republican governor posted on X (formerly known as Twitter) his support for the legislation.
Overall, the legislation would net a $1.1 billion tax cut after accounting for the addition of $1.1 billion in other funding changes at local levels.
“HB1 is not a ‘tax swap’ but a strategic move to attract economic development opportunities, stimulate local governments to address critical infrastructure needs, and foster real tax relief,” Lamar said in prepared remarks.
Sales tax collection changes
Mississippi collects a 7% sales tax. Revenue is split between the state and municipalities.
HB1 would phase down the state sales tax on groceries from 7% to 2.5%. The sales tax structure on other items would be adjusted to help offset the costs.
Additionally, the bill would end sales tax diversions to municipalities. As a result, the full sales tax collected would be applied to the state budget.
Municipalities and counties could recover the lost tax revenue by adding a general 1.5% local sales tax. Municipalities would be able to opt-out of this tax structure. Counties would use their portion of revenue for road and bridge projects.
Advocates said the new local sales tax would result in an additional $80 million per year for county road and bridge work. Critics counter that the tax package would cost the state more money down the road and result in revenue shortfalls.
Another notable provision covers fuel tax collection
Mississippi has an 18-cent excise tax collected on fuel purchases. The flat tax is unchanged since the late 1980s.
HB1 would add a 5% sales tax to state gas and diesel purchases. The fuel sales tax would add $400 million to the state budget.
The sales tax collected on fuel sales would increase the tax rate by an estimated 13 cents. Revenue would be routed to the Mississippi Department of Transportation for road and bridge work.
Also included in the bill is a provision to divert $80 million in gambling revenue that now goes to transportation into the state’s public employee retirement system.
The bill now moves to the Senate where a competing tax plan is in the works.
House Speaker Jason White, R-West, pointed out that the governor has shown “clear support” for HB1.
“As the governor requested, we intend to exercise every effort to send HB1 to his desk to be signed into law,” White posted. LL