Mississippi Gov. Tate Reeves (R) on Thursday signed legislation phasing out the state’s income tax, after lawmakers ironed out long-running differences over how to cut tax burdens.
The measure, which won final approval last week, will reduce income tax rates from 4% to 3% by 2030. If the state’s revenue growth outpaces spending, the tax rate would continue to come down until it is gone altogether.
A pledge to eliminate the income tax has been a cornerstone of Reeves’s tenure in office, but arguments between House and Senate Republicans have derailed those plans for years. The Senate has been more reluctant than the House in approving an all-out elimination.
“The legislation I’m signing today puts us in a rare class of elite, competitive states. There are only a handful of states in the country that do not tax income,” Reeves said. He called the measure a “transformation.”
The bill won bipartisan support in both the House and Senate. But some analysts said they worried eliminating the income tax altogether would put the state in a bind in the future. Kyra Roby, a police analyst at One Voice, wrote in Mississippi Today that other states had found themselves facing deficits after slashing taxes.
“Instead of prioritizing tax cuts that benefit the wealthy, policymakers should prioritize building a fair and sustainable tax system, where the wealthy and corporations pay their fair share, ensuring that every family, regardless of income, has the resources necessary to succeed and thrive,” Roby wrote.
But lawmakers aren’t likely finished with tax tinkering just yet. The initial bill approved last week included a typo relating to future income tax cuts that lawmakers warned could put the state in fiscal jeopardy in the long run.
Trigger language in the bill intends to allow Mississippi to reduce income taxes by 0.20% if revenues are greater than 85% of $407 million beginning in 2031, meaning Mississippi would need to reach a surplus of about $346 million. But a late amendment changed that threshold to 0.85%, meaning Mississippi would need a surplus of only about $3.46 million — a rounding error in most state budgets — to trigger the cut.
Similar typos applying to higher thresholds for income tax cuts remained in the bill. House Speaker Jason White (R) told reporters the legislature will “have conversations bout what a reasonable trigger looks like.”
The new law will also reduce Mississippi’s tax on groceries from 7% to 5%. That provision takes effect this year.
Once the income tax is finally phased out, Mississippi would join nine other states that do not levy income taxes: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming.
Mississippi already relies more heavily on sales and property taxes to generate revenue, according to the Urban Institute. It generates about half the amount of income tax revenue from individuals as the national average.