UPDATE: After adjournment in the Senate, the House took up SB 2971, a bond bill for institutions of higher learning. Chairman Lamar inserted the language from HB 1439, the Mississippi Tax Freedom Act, into the bill.
Changes made to the original language included the removal of the tax increase that was previously placed on farmers, loggers and manufactures. In order to make up the difference financially, Lamar said the overall phase out process would be extended by roughly a year or two.
The amendment to the strike all was passed and the bill passed on the floor by a vote of 89 to 22.
The bill will live on.
Tuesday’s deadline required original action on appropriations and finance bills on the floor opposite of the originating chamber. If that did not happen, the bills were dead. That included HB 1439, Speaker Gunn’s Income tax bill entitled the Mississippi Tax Freedom Act of 2021.
The bill was still in the Senate Finance committee come Tuesday morning. In order for it to move forward it would have had to be passed there and then the rules suspended to be brought to the floor. Chairman of Finance, Senator Josh Harkins, said early in the day that the bill will not move forward this session.
Harkins indicated that the plan from the Senate was to set up a study committee that will work through the details of the bill this summer and determine the correct way to move forward in an attempt to eliminate the state’s income tax.
“The bill is not going to be brought up this year, but we are going to be studying it over the summer,” said Harkins. He said he will bring forward a resolution which would implement the study committee later on Tuesday.
The issue for Senators’ seems to be time – there is not enough of it to consider the Speaker’s proposal. Harkins said that given the time that they have had to review the plan, they do not feel they have the data to support the decision to implement the phase out proposal.
“My goal is to put Mississippi in a posture that is the most competitive and prosperous position we can be in,” said Harkins. “We just need to make sure we get more data to show we are doing this right.”
Harkins expressed concern that lawmakers do not have the information needed to determine how much money will be taken out of the economy upfront. While it is a prudent effort to get the conversation started, it is not the time to move forward, he believes.
The Senate Finance Chairman also showed issue with how this could impact other tax policies of the state. Harkins said if the income tax is eliminated that will put an inventory tax back on the books, a tax that many individuals have been crediting when filing taxes each year.
In addition, the tax change could impact incentives for companies bringing jobs to the state. Currently, one of the items companies use to recruit is a rebate on income taxes for employees. If that is cut, those rebates will be invalidated.
Lt. Governor Delbert Hosemann also weighed in on the move for a study committee instead of moving forward with the proposal.
“It is always important to consider how we as conservatives can leave more money in taxpayers’ pockets. We plan on having a thorough joint conversation about tax reform this summer. A study should focus on truly broadening the base, incentivizing and rewarding hard work, strengthening economic development and training, and right-sizing government,” said Hosemann. “We should also realize a system of taxation drives economic decisions for individuals and for businesses, and plan accordingly.”
Speaker Gunn disputed the claims that the policy would have a negative impact on the state on SuperTalk radio Tuesday afternoon. Many have shown concern over the increase in sales tax. Gunn said they must remember that the increase in sales tax is only for items that are subject to a sales tax.
“All of us spend about a fourth of our income on items that are subject to a sales tax,” said Gunn. He said that makes a difference since a large portion of what most people spend their income on is not subject to a sales tax, including gasoline, insurance, utilities, and mortgages or rent.
Gunn said a major incentive for the removal of the income tax is the recruiting of talent to the state of Mississippi. Neighboring state’s like Tennessee do not have an income tax, which causes a loss for business owners in workforce talent.
The Speaker said they will continue to champion the bill as the Legislature stays in session.
“We are trying to look at other avenues to keep that issue alive and at the forefront of discussion,“ said Gunn. “I would say of the many people that have looked at this, most all of the people who have looked at this bill have endorsed it.”
Senator Harkins said he spoke with House Ways and Means Chairman Rep. Trey Lamar regarding the Senate’s position on the bill on Monday night. He informed the chairman that he would not be taking the bill out of committee and would instead propose the study committee.
“Unfortunately, the Senate, for now, has punted the ball on the singular most impactful legislation before us this year,” Rep. Lamar said. “The House will continue to push forward with the most transformative tax policy this state has seen in generations with the potential to significantly grow our economy, provide new jobs and lift thousands of fellow Mississippians out of generational poverty.”
Lamar added that this legislation provides a great opportunity, and he does not believe the Legislature should waste it.
“The time to act is now,” Lamar said. “I invite my fellow Senators to find the way to get on board and help us make Mississippi a better place for our children and grandchildren. Let’s go!”