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April 23, 2024

Mississippi Senate adopts own income tax cut package

The Mississippi Senate on Wednesday passed a bill to eliminate the state’s income tax on lower wage earners.

Senate Bill 3164, coming just five weeks after the House of Representatives passed legislation to eliminate the income tax through raising exemptions, is a smaller tax cut package aimed at eliminating income tax for those residents earning between $5,000 and $10,000 annually, the 4% tax bracket.

The bill, which passed by a 40-11 vote, would phase out the 4% tax bracket at a rate of 1% per year beginning in 2023 and would be phased out in full by 2026, according to the bill.

Beginning in 2026, the bill, if enacted, would not have an income tax levied on those making less than $10,000, and taxpayers earning above the mark would be taxed at a 5% rate.

The state currently has a graduated tax code, which is the same for individuals and businesses. The tax is set at 0% on the first $3,000 of taxable income, and 3% on the next $2,000 of taxable income. The 4% rate kicks in at earnings between $5,000 and $10,000 and is 5% on all income more than $10,000.

Under the Senate’s bill, a 5% tax would be levied on retail sales of food and beverages eligible to be purchased with food stamps, and the standard license fee for vehicles would be deposited into the motor vehicle ad valorem tax reduction fund instead of the general fund.

In addition, under the bill, a portion of the additional fees from distinctive license plates from certain universities located outside the state would be deposited into the motor vehicle tax reduction fund instead of the general fund.

House Bill 531, which passed in early January, would eliminate the income tax by increasing exemptions on income. A single taxpayer earning less than $37,700 would be exempt from taxes and joint filers earning less than $75,400 beginning in 2022 would not pay income tax. The House plan exempts head of household filers earning less than $36,600 from paying income tax.

Russ Latino, president of Empower Mississippi, a group that works to give voice to state residents affected by public policy decisions, said that with the state’s burgeoning surplus, “there is an opportunity to go further and improve the jobs and economic environment for Mississippians.”

“In a time of unprecedented inflation impacting our state’s families and unprecedented stockpiles of taxpayer dollars sitting in state government, we can act bolder, eliminate the income tax, and restore to Mississippians the money they earned so they can take care of their families and help grow our economy,” Latino said in a news release. “The state is on pace for the second billion-dollar surplus in as many years and is conservatively projected to have over $4.4 billion in reserves by next year.”

This article was originally posted on Mississippi Senate adopts own income tax cut package

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