(The Center Square) – The House of Representatives in Mississippi approved a bill Wednesday that would eliminate the state’s income tax.
House Bill 531, which would create the Mississippi Tax Freedom Act of 2022, passed by an overwhelming 96-12 vote and will now move to the state Senate for consideration. If passed by the Senate and signed by the Gov. Tate Reeves, the bill would go into effect July 1.
If adopted, Mississippi would become the 10th state in the nation to not have an income tax on its residents.
Ways and Means Chairman Rep. Trey Lamar, R-Coldwater, said the 2022 version of the bill is “much simpler” and “easier to understand” than previous proposals. He spoke to two elements of the bill. One, the state’s sales tax would increase to 8%, but would still be 1.5% percent lower than neighboring states. Second, the bill would phase out the income tax by increasing the amount of taxpayer exemptions.
“Revenue collected over and above growth plus 1.5% is what we would use to buy down the income tax,” Lamar said on the House floor. “Based on historical numbers, that would happen in 10 to 12 years.”
Taxpayers who file as single would be given an exemption of $37,700 for each calendar year beginning in 2022, while the married exemption has been set at $75,400. For those filing as head of family, the exemption is set at $36,600 under the bill.
Under current tax code, exemptions for single filers is $6,000, and $12,000 for those who are married and file joint returns. Head of households currently receive a $9,500 exemption.
Exemptions for dependents is set at $1,500 each, while taxpayers age 65 and older will be given a $1,500 exemption.
Under current tax code, the state has a graduated tax rate, which is the same for businesses and individuals. The graduated income tax rate is 0% on the first $3,000 of taxable income, and 3% on the next $2,000 of taxable income. A 4% rate is assessed on the next $5,000 of taxable income, and the rate is 5% on all taxable income more than $10,000.
Reeves said earlier this month he would like to see the income tax eliminated in the state as a way to put more money into the pockets of the working class while at the same time hoping to level the playing field with neighboring states Texas, Tennessee, and Florida in hopes to attract new businesses to move into Mississippi.
@PhilipGunnMS and others have introduced legislation to abolish the state income tax.--Repealing the Mississippi income tax would be both a moral and economic good, leading to higher incomes, competitiveness, and prosperity for all Mississippians! pic.twitter.com/Td9pcekRZK— Mississippi Center for Public Policy (@mspolicy) January 12, 2022
The bill would increase the state’s sales tax from 7% to 8.5%. A portion of the sales tax would be put into the motor vehicle ad valorem tax credit and into the general fund.
The sales tax increase would be more than enough to offset the drop in income tax revenue, the bill reads.
Russ Latino, president of Empower Mississippi, championed the House’s passage of the bill.
“Our research, which included dynamic modeling by a Ph.D. at Rice University, shows the potential of profoundly positive effects for all Mississippians associated with eliminating the income tax,” Latino said in a news release. “People will have more money to invest in their families, businesses, and communities and Mississippi will be a more attractive place to move.
“The current proposal is an improvement over last year’s offering, which itself was a good first step. Under House Bill 531, Mississippians will experience a larger net reduction, with a smaller offset. We know there will be more work and more compromise required, but Mississippi needs bold action and this one heck of a start."