Sunday, September 22, 2024

Bill Crawford: Revenue Winds Have Shifted

Are House Speaker Jason White and Lt. Gov. Delbert Hosemann whistling in the wind?

Both have appointed special committees to look for prudent ways to eliminate the state’s personal income tax and/or reduce the sales tax on groceries.

Their chief airbenders are committee chairs: Ways and Means chair Trey Lamar and Appropriations B chair Scott Bounds in the House; Appropriations chair Briggs Hopson and Finance chair Josh Harkins in the Senate.

Their task will be much more difficult than when major changes to personal income taxes were adopted in 2016 and 2022. The revenue winds have shifted.

In 2016, the Legislature phased out the 3% personal income tax bracket over five years (2018 – 2022). In 2022, the Legislature eliminated the 4% tax bracket beginning in 2023 and began a four-year phase-down (2023 – 2026) of the 5% tax bracket to a new 4% bracket.

The first cut was projected to eliminate $145 million in income tax revenues, the second one $515 million.

Growth in other state revenues were projected to increase sufficiently to offset these and other cuts. They did with huge surpluses through fiscal year 2023. However, for FY 2024, year-over-year collections increased just 0.2%. It took high interest earnings on the state’s multi-billion dollar surplus and unspent federal funds to get that. Through two months of FY 2025, collections were basically flat, up 1%.

With two more years of personal income tax cuts still to phase in and interest rates and federal funds now falling, the state’s capacity to further cut taxes and avoid future deficits looks doubtful.

The outlook is even more pessimistic when other fiscal inputs are considered – the five-year phase-in of increased payments to PERS, the new funding formula for schools that includes inflation adjustments, the growing demand to put in place increased funding for roads and bridges, and so on.

Nor does there appear to be sufficient revenue to cut grocery taxes in half as proposed. The projected annual revenue decrease for that is $375 million.

In 2021, state economist Corey Miller and senior economist Sondra Collins issued a report showing big hits to state revenues if personal income taxes were eliminated. The dynamic model they used estimated it would take a 3.75% increase in the sales tax for revenues to break even. That would be on top of the current 7% rate.

To be prudent, legislators should hold off on new tax cuts until the current ones have completely phased in and revenues post-COVID have stabilized. They might also come to appreciate that when the current phase-in finishes they will have achieved a historic conservative goal – a flat income tax rate.

“The prudent give thought to their steps” – Proverbs 14:15

Crawford is a syndicated columnist from Jackson.

20 comments:

Anonymous said...

They are fixin' to run for higher office by pandering to the useful idiots.

Anonymous said...

There were always just a few legislators who had any grasp of higher mathematics or finance and fewer still who understood economics.
But, we did elect enough who respected education and experience who didn't think their "guts" and "feelings" were infallible.

Go Away Granny Troll said...

Using Crawford's logic any consideration of Medicaid expansion should be shelved until 2027 so that the full effects of the existing tax cuts can be measured and evaluated. Because such expansion WILL require incremental spending of monies, per Crawford, that we apparently do not have.

Miller and Collins are both conflicted on the subject of tax cuts as their full-throated boosterism of Medicaid expansion is already well established.

Anonymous said...

Leave the income tax alone. Cut grocery by 50%. Wait for the other tax bumbles to play out. FFS.

Anonymous said...

Cutting grocery tax in half only means that city dwellers who own real property will get to eat the municipal sales tax revenue shortfall through a municipal mileage increase.

Anonymous said...

Good post.

Anonymous said...

The cost to run the states operations increases every year. The only way to fund those operations is through the collection of taxes. Either revenue increases at the same rate of expenses or cut expenses to match revenue. The elimination of income taxes was always a political ploy by those currently in power to further their own political careers.Then when the inevitable crisis came they would be long gone.We need to start electing people who will tell us the truth even if we may not like it. Sadly that will never happen.

Anonymous said...

11:36 - That works two ways. People have to be ready to accept the truths they're given and these days, no one has the balls to hear it.

Anonymous said...

According to the mythical workforce participation rate stats (again, mythical), this state has attracted a lot of retirees and is long time home to many more.

They have no income to report in most cases and we advertise nationwide the fact that we don't have a state tax on any sort of retirement income, in an effort to attract more of them.

Cut or eliminate the grocery tax which affects everybody but those who use EBT cards and the latter don't worry about grocery taxes, income taxes or property taxes.

If the federal government would pay (to municipalities directly) taxes on EBT purchases that would solve the other problem and rescue the small towns.

Anonymous said...

State income tax on a $40k salary would be somewhere around $1500. That extra $125 per month in a taxpayer’s pocket is not worth bankrupting a state over. The ones in this state that need $ in their pockets each month don’t even pay taxes anyway.

Anonymous said...

Bill has never met a tax reduction he supports

Anonymous said...

One thing for sure: A majority of taxpayers earning between $20k and $60k would vote for the state filing bankruptcy in exchange for a one time payment of $1,500.

They won't have a clue what the bankruptcy filing would do to thier lives, but would vote for it anyway.

There's a reason Mississippi is where it is.

Anonymous said...

8:37 nailed it.

Anonymous said...

There is no income tax. It’s instead a tax on working. Income tax, work tax, whatever you need to call it, it’s morally wrong and simply genteel robbery at eventual gunpoint by our betters in government.

Anonymous said...

Why are these simpletons talking about 'state bankruptcy'. Since when is this even a remote possibility under any circumstances?

Anonymous said...

We have to attract human and capital investment to Mississippi. Growth is key.

Anonymous said...

The large demographic that's mired in single parent households, places no value on the traditional family, views educational venues as daycare facilities, places little value on work and relishes the thought of receiving more stuff for less contribution - That's the dynamic that will forever stop this state from realizing its potential.

That dynamic and the roadblock it presents is a brightly lit sign to any company or family taking a look at Mississippi.

Anonymous said...

As long as Democrat Delbert Hosemann is in the mix, Mississippi will never take bold steps forward.

Anonymous said...

If we reach the point of no income tax, we still will not grow to the extent some leaders believe we will. I would rather keep the income tax yet lower the grocery tax but frankly our state needs the revenue from all of them.

What we don't need is so many layers of government at the city, county and state levels with people drawing salaires and not doing much beyond the work of a part time person in some of those roles.

Anonymous said...

Hey there Shotgun. Be specific.


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If you get tired come relax at the Fox News Tent. To gain admittance to the VIP section, bring either your Republican Party ID card or a Rebel Flag. Bringing both will entitle you to free drinks.Get your tickets now. Since this is an event for trolls, no ID is required, just bring the hate. Bring the family, Trollfest '07 is for EVERYONE!!!

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