Major changes to tax plans in both chambers
Both the House and Senate were busy advancing heavily amended tax relief proposals in advance of yesterday’s deadline for action. Both chambers voluntarily moved closer to each other, though the chasm between the two is still wide with only a few weeks left in session.
On Monday, the House took Senate Bill 3164 and inserted a modified version of its previous plan, which included a slower income tax repeal than previously proposed, but without a sales tax offset. In kind, the Senate took House Bill 531 and inserted a new proposal to reduce the rate applied to most income and provide a temporary moratorium on the gas tax.
Now SB 3164 and HB 531 head back to their original chambers to decide whether to accept the offered amendments (concur) and send to the Governor’s desk or invite conference negotiations between the chambers. The latter is almost certain to occur.
Here are the details from the changes in the House to Senate Bill 3164:
– Income tax exemptions would be increased to $25,000 for single workers and $50,000 for married filers. This is down from the original House proposal that increased the exemptions to $40,000 and $80,000, respectively, in year one.
– The full phase-out would be implemented based on a fiscal rule concerning revenue and spending, with an upward adjustment in the amount of spending growth allowed to 1.6 and a cap on the amount of tax that could be cut in a year to $150 million.
– There is no sales tax increase. The original plan included a 1.5 percent increase to partially offset the cost of the cuts.
– The grocery tax would be reduced to 4 percent at a quarter of a point per year, a slower pace than originally proposed.
– There is no car tag reduction. The House’s first plan included a 50 percent car tag credit.
The modified plan moves $500 million in capital expenditure reserves into a budget stabilization fund to ensure the plan, in initial years, doesn’t disrupt the state budget. Early calculations of the plan indicate a roughly $700 million cut in the first full year in effect (FY 24).
And the Senate made these changes to House Bill 531:
– Begin a four-year drawdown of the income tax rate applied to most income in Mississippi from 5 percent to 4.6 percent.
– It then eliminates the 4 percent tax bracket, which applies to the first $5,000 of taxable income, over the next four years.
– Immediately reduces the grocery tax to 5 percent.
– Places a 6-month moratorium on gas taxes.
I continue to believe we can be more aggressive, immediately moving to a flat tax between 4 and 4.25 percent and then phasing out the income tax with a population plus inflation style trigger. This would be a far simpler plan with fewer moving parts and more economic benefit.
But we shouldn’t discount the positive movement from both chambers over the past two days. They could have easily inserted their original language into the bills from the other chamber, but they did not do that. They, instead, chose to show a willingness to work toward the other chamber. That’s a good sign for the last two weeks of the session.
We will continue to keep you updated.