Sunday, March 20, 2022

Bill Crawford: Remedial Math Needed in Tax Cut Debate

 Remedial math has been the most in-demand developmental class in Mississippi colleges for decades. Perhaps that helps explain the difficulty many public officials seem to have in grasping budget issues.

For example, the Governor and top officials say the state is in its best financial condition ever. But, a 2021 independent financial review gave the state a D financial rating. 

How can both of these add up to be true? 

Well, the massive influx of federal COVID-19 dollars has put the state in an unprecedented position with hundreds of millions of dollars of unallocated cash. At the same time, growing unfunded liabilities in the state’s retirement system leave it billions of dollars in the hole.

“We collected more than $1 billion over what was spent in the fiscal year budget,” said Gov. Tate Reeves. “We have collected $400 million more than projected in this fiscal year through the first four months.”

“Mississippi had $16.2 billion in bills and only $8.3 billion in available assets to pay those bills after capital and restricted assets were excluded,” reported Truth in Accounting, a non-profit that provides analysis of government fiscal data.” This resulted in a $7.9 billion shortfall” and earned Mississippi a D rating in financial health.  

Dazzled by the huge amount of cash on hand, our math challenged leaders only see new tax cut and spending opportunities, not the systemic risks from decimating the state tax base and ever-growing unfunded liabilities. 

Realize, too, the state is not quite halfway through implementing historic tax cuts adopted in 2016 – the phasing out of corporate franchise taxes and the 3% income tax bracket. Still and all, Gov. Reeves, House Speaker Philip Gunn, Lt. Gov. Delbert Hosemann and their Republican minions in the Legislature are committed to adopting an even bigger tax cut. 

Reeves and Gunn (as of last week) want to abolish the personal income tax which generates about $2 billion per year or 34% of total state revenue. Hosemann wants to slash personal income taxes but not yet eliminate them at a cost of around $460 million a year. There are also proposals to cut the sales tax on groceries, significantly increase teacher pay, and more.

Meanwhile, unfunded liabilities continue to grow and put the Public Employees Retirement System (PERS) at risk. The shortfall hit a new high of $19.4 billion last year despite a 33% return on investments. That extraordinary yield let PERS delay an expected increase in employer contributions that would have cost the state up to $100 million more per year. 

Fitch, Moody’s, and Standard and Poors credit rating companies are watching. Fitch said it will “monitor developments related to the proposed changes” to see if revenue gaps related to spending occur. 

The current financial euphoria from the influx of federal billions and the economic boom driven by artificially low interest rates are coming to their ends. As normal growth and revenue collections return, the equation for financial stability will not be excessive tax cuts plus increased spending plus ballooning unfunded liabilities.   

Even remedial math teaches that will not add up to a positive number.

“For everyone who exalts himself will be humbled, and he who humbles himself will be exalted” – Luke 14:11.

Crawford is a syndicated columnist from Jackson.


19 comments:

Pandering for Votes said...

He is right. The pols are virtue signalling because the buzz words "tax cuts" and "law & order" get them votes.

Just say no to these tax cuts! It takes money to run the government and to pay for services.

Tater has a degree in accounting? Seriously?

Anonymous said...

If we just cut off the handouts to the illegals and lazy democrats then we can afford all of our hypersonic stealth laser missiles and silent nuclear submarines.

Anonymous said...

This column is what Democrats do, they cherry pick sources. Truth in Accounting is a small boutique think tank with a staff of 3 people. Focused on debt they are negative about 39 of our 50 states but actually rank Mississippi as 32nd best in the nation. TIA is particularly harsh on underfunded pension systems and gives PERS a D grade for the last 12 consecutive years. I'm sure the bigger government double-dealing Crawford doesn't want you to know that.

Kingfish said...

Honest question. What will happen to tax revenues if within a year or two we are in a recession, possibly a severe one?

Anonymous said...

It's not math they don't understand Bill, it's a lack of CHARACTER when it comes to Mississippi politicians....oh, they know how to do math REAL good - they just don't have the integrity or backbone to serve the people of Mississippi as a whole with the money - they're all far too busy jockeying for position to pay off their campaign contributors and family/friends with favors, contracts, jobs/ positions, etc.

They're no different than Sam Norton at Shawshank.
https://youtu.be/kYJe-LJsRx0?t=143


Anonymous said...

@Kingfish
It depends on what tax revenue we are talking about. Consumption of vice goes through the roof during hard times. Booze, Cannabis, Lottery, Casinos, etc will do fine. If only we had legal prostitution in Mississippi.

Mike T said...

Bill and Kingfish are right on this. MS finds itself in an unprecedented and unique position of having surplus $$. Critical needs must be met before considering eliminating a major revenue source. Proposed cuts seem to be based on politics, not economics.

Anonymous said...

The poor ultimately pay for tax cuts with reduced government assistance.

Anonymous said...

No better time to leave Mississippi. Three years from now you won’t even be able to sell a house in Desoto, Rankin or Madison counties, much less anywhere else.

Anonymous said...

A sleezy boxing promoter once emptied a bag full of ten and twenty dollar bills on a bed completely covering an illiterate boxer who quickly signed a
stupid one sided contract with the promoter. The boxer had never seen so much money in one place at one time and was so excited he signed a contract worth hundreds of thousands to the promoter for about ten thousand dollars on the bed. Mississippi is home to country bumpkin legislators who know that you cut taxes NOW especially when we got so much money.

Anonymous said...

KF, good point! However, by then, Gov. Reeves probably will be Senator Reeves and enjoying bacon wrapped shrimp at parties hosted by Washington lobbyists. We'll be the ones to suffering and our children will be leaving Mississippi in mass.

Anonymous said...

@Kingfish
Depends on the revenue stream. In the last recession, consumer spending was the first thing to crater. People postponed buying that new TV, skipped going out to dinner, etc. That was followed by the unemployment rating starting to creep up. MS is already overly reliant on sales tax revenue, which can be an inconsistent revenue stream. Income tax is more stable since the jobs market usually lags behind. Sales tax is the speed boat that’s great when you have gas, but dead in the water when you run out. Income tax is the big cruise ship lumbering along, and takes a while to speed up or slow down. You know the only ones usually able to weather a storm in a recession? Large corporations and mega companies, just saying.

Anonymous said...

Phillip Gunn shouldn't be in the position he's in. He strikes me as a Chris McDaniel wanna be.

Anonymous said...

Mr. Gunn sho did cook up a brood of goslings on his gas grill, but Canada Geese lovers think he's a hoser, aye. I like his spunk.

Anonymous said...

Sales tax in Tennessee is 10% or more. Ours will be
about a year from now.

That'sMisterDeplorableToYou said...

@3:35 Mmmmmm . . . bacon wrapped shrimp, Taters scalloped and garlic bread. You just solved the mental block I was having about what to fix for supper and you wasn't even trying.

That'sMisterDeplorableToYou said...

@12:54 Why do the poor people stay in Mississippi? Are they here because they're poor; or are they poor because they're here. Do you know that an unemployed single mother in Boston, Mass. gets nearly as much in benefits as she would earn if she were a teacher?

LEAVE MISSISSIPPI, poor people. Boston, Minneapolis, San Francisco, and many other places literally beckon you with a MUCH higher standard of living and a better chance of not being poor for the rest of your life.

Anonymous said...

One thing is for sure, they got everyone fetching balls instead of being laser focused on the silent takeover by they and them.

Anonymous said...

As flush as the state is with money, it still isn't enough to address PERS. The tax cuts when we have a massive unfunded liability is just politicians acknowledging the reality that we won't "fix" PERS until there is a crisis. The reality is that former politicians promised that future taxpayers will pay pensions for retired workers, and voters are more or less saying f#!# that.

Definitely risky to hold a lot of property in Mississippi as if they try and recover the money through sales or income tax, people will just leave. So all they can do is assess property, and that's only going to happen if a court orders them to (and maybe not even then). But really don't know what's going to happen to all the PERS retirees when we get to that point.


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