Governor Reeves has proposed doing away with the individual income tax. If passed, this would eliminate about $1.9 billion of tax revenue annually, or more than thirty (30) percent of tax revenue to the state. Before taking such drastic action, we must first logically and deliberately determine what we need each component of government to do, and how much is needed to fund it. Then the state can look at innovative tax reform measures to fund what is required in the fairest way with user fees or flat taxes.
In terms of needs, infrastructure is at the top of the list. No other obligation of state government affects the day-to-day life of our citizens, nor the economic development of our state, more than infrastructure. And ours is in poor shape. By all accounts a minimum of $300 million a year is needed to address this issue. In its 2020 Infrastructure Report Card, the American Society of Civil Engineers rated Mississippi Roads the lowest in their report (D-). HB-1, the Mississippi Infrastructure Modernization Act of 2018, was passed in the 2018 Special Session and has been touted by Governor Reeves as the answer to our state infrastructure crisis. Despite its title, HB 1 provides very little funding for state roads and bridges. This is demonstrated by a simple analysis of the five parts of HB-1.
1. $250 million emergency road fund. This is simply borrowing money against a $36 million a year gaming revenue diversion the state has been using since 1988. Emergency requests approached $1 billion. Only $37 million of the $250 million awarded for emergency repairs was designated for MDOT to use for state road and bridge needs. The bulk of the money justifiably went for local bridge needs because of an emergency declaration closing 100 local bridges. Still, why did we wait so long to take any action?
2. $80 million from the state lottery. The lottery only began generating funding in late 2019, and full funding is phased in over four years, subject to the lottery making projections. While this is a good start, this cannot be part of a long-term solution as infrastructure funding from the lottery is subject to sunset repeal on August 1, 2028.
3. $120 million use tax (internet sales tax) diversion. This is a substantial amount of money for county and municipal road and bridge needs, but not one penny goes to MDOT for state roads and bridges. The money is derived from what is referred to as a “user fee” on internet sales. The fee is the same as the 7% sales tax collected on brick-and-mortar sales in local communities. 18.5% of sales tax collections are used to fund local governments. Local governments have been slammed by the paradigm shift to consumer purchases over the internet. In fact, internet sales exceeded brick and mortar sales in 2016. In essence, the county and city governments are now receiving from internet sales, tax revenue to replace funding formally provided by brick-and-mortar sales, except the money is restricted for bridge and road improvements.
4. Sports betting. Up to three million a year from sports betting is designated for bridge and road maintenance. $2.3 million was paid in FY 2019, but this is subject to a 2028 sunset repeal.
5. Electric/Hybrid vehicles. A surcharge was added to license tag taxes of $150 per year for electric vehicles and $75 a year for hybrid vehicles. On October 15, 2018, there were roughly 14,000 hybrid vehicles and 1,000 electric vehicles that together generated $1.2 million in taxes a year. Interestingly, these assessments are to be adjusted annually for inflation. Since the user fee on gasoline was set in 1987, without an inflation adjustment, the real value of the 18.4 cents per gallon revenue gets weaker every year which is exacerbated by increased costs for road and bridge repairs. It’s also worth noting that since 1987, Mississippi and Alaska are the only two states in the country that have not adjusted their user fee on gasoline.
Additional funding for state roads and bridges will never reach $100 million a year. The only significant money for state road and bridge needs is from the lottery which began collections in late 2019 and stops in 2028. The only long-term additional funding for state roads and bridges that will exist after 2028 is the license tag surcharge on electric and hybrid vehicles. HB 1 is simply not a viable solution to the funding crisis currently existing for our state roads and bridges.
The proposed state income tax repeal is premature until we get our infrastructure funding in order. Reforming our state’s tax structure should be considered in the context of stabilizing funding for infrastructure to meet real needs we have, modernizing our roads and bridges, and updating the tax structure in a fair way that still funds vital government services.
Mr. Waller is the former Chief Justice of the Mississippi Supreme Court. He was a Republican candidate for Governor in 2019.
36 comments:
So Waller is STILL schill for the roadbuilders? Whats the deal, does he have a campaign debt and getting paid by them to carry their water, just as they paid for his campaign in 2019?
Why not just make gasoline cars pay the same $150 per year that electric cars already pay? That seems fair for all and would greatly improve our roads.
The poorest state in the country planning to eliminate 1.2 billion in taxes. That would not be good!
Electric cars pay that fee because they use the roads but do not use gas, 12:30. The best thing to do would be to raise the gas tax. But, our Governor and our Speaker are determined to go to their graves saying, "I never raised any taxes on anybody," which gives the rest of us roads similar to Somalia or Afghanistan.
Wow, an actual pragmatic approach. What a refreshing reprieve from the pie in the sky ideologues (both left and right) who dominate today's political atmosphere.
When it comes to abolishing the income tax, it's a pretty simple question:
Do you think Mississippi is more like Texas and Florida, or more like Kansas and Louisiana?
Texas and Florida thrive, and they have no income tax. But did abolishing the income tax cause their growth? The answer is no, and it's not really an opinion question. Texas grew at the same rate before and after abolishing its income tax in 1993. Florida hasn't had one since 1855, but its growth was pretty mediocre for a full century thereafter, which makes a causal link implausible.
Both states have huge natural advantages in terms of resources and climate, and have historically made good public policy decisions like investing in public schools. The lack of an income tax might be a cherry on top for some, but it's the quality of cities, schools, and non-replicable natural advantages that draw people and businesses.
By contrast, when Kansas and Louisiana dramatically cut taxes, fiscal disaster followed. Governors lost their jobs and budgets were slashed. No surprise: entrepreneurs weren't interested in moving to less-than-attractive states to get back a few thousand a year in taxes. Putting a cherry on top of a crap sundae doesn't change the fact that it's crap.
So ask your self, objectively: As a destination for business is Mississippi more like Texas and Florida, more like Kansas and Louisiana, or OBJECTIVELY WORSE THAN ANY OF THE ABOVE?
The answer is obvious, and so is the fiscal catastrophe we'll inflict if we follow Tate's plan. It's like a struggling, borderline insolvent company looking at Facebook and Google and thinking, "My gosh, look at the huge shareholder dividends they give! I know! I'll send shareholders big checks too, and be just like them!"
Don't let the Republican Tax Cut Religion make our state even worse off.
Can't wait to hear what Jim Hood, Robert Foster, Robert Shuler Smith and the rest of the people who ran for governor in 2019 have to say.
Tax and spend;spend and tax.Like a a snake eating its tail.
If Mississippi gets rid of 30% of its tax revenue, the federal government needs to just cut funding to the entire state.
Finally, a well-reasoned article that explains the short and long-term funding issues we face with infrastructure. The fact that the long-term funding ends in 2028, just after the current administration leaves office (if re-elected), is troublesome.
The first step to solving a problem is understanding that there is a problem. MS infrastructure is bad now and will continue to get worse using the current thought process. Infrastructure will not heal itself, and wishing it away or ignoring the problem will not make it go away. Job producing, economy building businesses will not come to a state with bad roads, there are too many other options in other states.
While doing away with the income tax is popular, a responsible leader would also explain either how to make up the loss of revenue or what would be cut out. I have not seen that in the Governor's tax cut. Did I miss it?
This state is in desperate need of elected leadership that sees beyond a 4 or 8 year term. Someone with a vision that grows the size of the state's revenue "pie", not re-slices the same size pie. Otherwise, we will continue to spin our wheels deeper and deeper in the mud.
Waller has done an excellent job of explaining the problem. I hope future articles and discussions will address ways to increase revenue. But we must all realize that growing revenue begins with fixing the issues we have now with solid, reliable funding geared to accomplish specific goals.
I'll start the discussion by saying I believe the gas tax should be increased by 5 cents per gallon and used on state infrastructure for maintenance only. It is a user tax and those that use the roads should be willing to pay for the maintenance of those roads. The federal government is $27 trillion in debt and we can expect very little if anything for future road repair projects. The money must come from somewhere and we, the users, are it.
If they cut out individual state income tax you ban bet your ass they will get it from somewhere else.
C'mon Tate. You had to be planning this even before you got elected, but this is not the time to start even whispering about eliminating any revenue stream for Mississippi. Don't consider any NEW taxes but don't monkey with what people are already doing. Things are not exactly stable right now. Jeez, where have you been?
@1:32 - hate to tell you, genius, but Texas hasn't ever had an income tax. matter of fact, it's prohibited in their state constitution. Try again.
@12:51 - I understand electric cars don’t use gas, it just doesn’t make sense why they would pay more than internal combustion cars. A car that gets 25 mpg would have to drive 20,000 miles a year to pay the same tax amount as the electric car. My suggestion is still to tack on $150 per tag on top of current gasoline tax. Electric car users pay the $150 no matter if they drive 0 miles or 50,000 miles. All the other drivers can pay the same also.
Well written article. Gov. Reeves is merely pandering on income taxes being abolished.
How many times will Gov. Reeves say, "Trump" in his State of the State speech, today?
Who cares what he thinks? A former Supreme Court justice who lost. Next...
Wow, an actual pragmatic approach.
Tell us, what exactly did Waller propose beyond not rushing into an elimination of the income tax? Since you are so enthralled by his "refreshing reprieve", share what Waller is suggesting be actually done. We'll wait while you figure it out.
@1:32 PM isn't remotely objective.
Hopefully, Waller (or someone that thinks like him) will run against Tate. We need adults like Waller, Hoseman, and Gunn (or someone who thinks like them) running things to get us off the bottom of every metric that matters.
The time to raise the gas tax was when gas was cheap. Don't know if any of you has noticed but that boat is now sailing over the horizon and won't be back for a while.
January 26, 2021 at 12:11 PM
Waller is fronting for 'Out-of-Time' Hosemann. Hosemann is so desperate he would run against Reeves as a Democrat if the national party stink wasn't so damn bad.
2:19 PM
All the other cars pay their share through gas tax (which should be higher and we should get rid of taxes on groceries).
12:11pm - don't know why Hosemann wouldn't run as a Democrat, most everything he has done has met their agenda. And with Gunn partying up with the black caucus (same thing, different name) in the House, his agenda has gone to hell this term.
Back when McCoy was challenged, he had to marry the caucus to keep his power seat at the dias, and mid-term last session (when he couldn't stand not having his hands in the COVID cookie jar) he did the same thing - sold out to the caucus.
For those that want someone that thinks like Waller - you've got them. In Hosemann particularly. And moving every so much closer with Gunn. Except of course, that Gunn has been promoting this same theme, eliminating of the income tax, for the past four years along with Reeves. Guess he still has a small conservative bone in his spine, unlike Hosemann and Waller.
Waller is done. Other than self serving press releases by himself. Tate is vulnerable. Quit comparing Waller to Delbert and Gunn. They are quite the triangularate. But I'd go with Delbert if he ran. Hands down.
But I'd go with Delbert if he ran. Hands down.
Why? Be specific. Focus on policy, not personality or emotions. Put up.
Waller did not publish this presser if he were NOT running.
The hat on his head is itchy. It's 'bout to get tossed in the ring.
Not to worry. Girard Gibert has assured us that everything will simply 'fall into place' when income tax goes by the wayside. And if you don't believe HIM, you can always listen to Russell Latino bloviate for forty-three minutes of confusion and come away scratching your head.
I think there’s a lot of people out there like me who are social conservatives and economic moderates. I want quality government, education, infrastructure, and healthcare, but I don’t exactly get giddy about men using women’s restrooms or late term abortions- call me old fashioned! Libertarians piss me off almost as much as liberals do.
Why in the world shouldn’t the marginal tax rate be higher for millionaires to pay for roads or schools?
Everybody needs government services and infrastructure, but nobody wants to pay taxes. It's just human nature to look out for oneself first.
That should be why we have elected officials. To make objective evaluations and decisions as to how the necessary functions are funded fairly.
Tater is just playing populist. Abolishing the income tax without having a stable, reliable source of funding is nothing more than pandering.
I'm all for a comprehensive evaluation of how to best raise the revenue necessary for our state to function, but this falls far short of that. If Mississippi were flush with cash and experiencing regular budget surpluses then reducing taxes would be appropriate. Too bad we are not and Tater will just lead us down the path of implosion.
Nice to see that he is still a liberal tax and spend Democrat.
I hope Waller runs. It would be nice to upgrade from the clown show we have.
Waller, Gunn and Hoseman are all three 'sneaky snakes'. They're good at what they do, which is talking out of both ends of the snake's body. When you can't easily tell whether a man is a liberal or conservative, he's a snake. And they'll all three promise to not bite.
Unpopular Governor trying to become popular. That’s all.
"Why in the world shouldn’t the marginal tax rate be higher for millionaires to pay for roads or schools?"
Let's begin with 'Why in the world SHOULD they'. You live in a fantasy world of confiscation based on 'Each according to his ability to pony up' and gifting based on 'Each according to his perceived need'. How is it you people always come around to the notion of penalizing those who got off their asses and created wealth? How many lashes, according to you numbskulls do they deserve?
Today's wealth is often a blip on a chart that disappears in a World-Com second.
I would love to get rid of the state income tax, however, the state can’t afford to. One thing, it hasn’t funded PERS. Get PERs into better financial shape before eliminating the income tax. It would be catastrophic if the State defaults on its financial obligations.
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