During the 2022 Legislative Session, historic opportunities for growth and equity abound. State lawmakers are entering the current legislative session with approximately $4.2 billion extra to spend. The surplus is welcome news, but state lawmakers shouldn’t use the surplus as a justification for eliminating the state individual income tax―a tax cut that benefits the state’s wealthiest and further shifts the state’s tax burden to lower-and middle-income earners in Mississippi. Instead of enacting another tax cut for the wealthy, state lawmakers should use this opportunity to raise additional revenue and prioritize long-term investments that foster a better future for all Mississippians.
The state’s current revenue surplus should not give state lawmakers more reason to eliminate the state individual income tax. Higher than anticipated state tax and other revenue collections and leftover revenue from the previous fiscal year contribute to a portion of the surplus. But these kinds of surpluses are normal, especially after economic recessions. Every state is required by law to balance its budget. Therefore, projected revenues for an upcoming fiscal year equate to or surpass expectations. It is no surprise, then, that amid the coronavirus pandemic, the Legislature cautiously estimated revenue projections. These cautious estimates along with better-than-expected state economic performances and federal relief have provided the Legislature with extra spending power.
Even with the surplus, though, state revenues aren’t high enough to support public services―nor are they enough to support tax cuts for the wealthy. For the current fiscal year, although total state revenue is higher than the previous fiscal year, state spending from its General Fund―funds that generate from general state tax collections and pay for key services―remain low, or stagnant. For example, recommended public and higher education General Fund appropriations for the Fiscal Year 2023 decreased from the final estimated for the Fiscal Year 2022 projections. This means that, even with extra money, public education in Mississippi remains underfunded and more Mississippi families will continue to shoulder the burden of higher education costs. Similar examples can be made with healthcare, infrastructure, and other services throughout the state. As such, it would be unwise for state lawmakers to spend the revenue surplus on tax cuts for the wealthy, while key public services that people and communities rely on and that benefit all of the state’s residents remain underfunded.
Along with these surpluses, state and local fiscal recovery funds from the American Rescue Plan Act provide an opportunity for state lawmakers to create an even better Mississippi. Federal lawmakers intended for state and local lawmakers to use the fiscal recovery funds to help with pandemic recovery and to address disparities in health and economic outcomes faced by low-income communities, communities of color, and Tribal communities as a result of the pandemic. This one-time federal stimulus has the potential to grow our economy, strengthen our communities, and make this a place where all Mississippians thrive. But if state lawmakers eliminate the state individual income tax now, they will undercut the true intent of the funds and we will miss a significant opportunity to meet the state’s most pressing needs and build for our future.
Instead of prioritizing a tax cut that benefits the few, state lawmakers should consider using this historic opportunity to create new, transformative investments that will benefit all Mississippians. During the 2022 Legislative Session, state lawmakers will redraw state legislative districts and likely address ARPA spending, Medicaid expansion, teacher pay raises, medical marijuana, and more. To the extent that state lawmakers want to also address tax reform, they should focus on reforms that center on equity and help decrease race and gender income disparities. State lawmakers should use this opportunity to enact reforms that compel everyone to pay their fair share of taxes like strengthening, not eliminating, the state income tax. They could also eliminate or reduce the state sales tax rate on groceries and adopt tax credits targeted to low-income people, such as a refundable state earned income tax credit.
Now is the opportunity for state lawmakers to fund our future by enacting equitable tax and budget policies that would raise revenue and help lead to true, sustainable economic growth. Cutting taxes now would have a serious opportunity cost, reducing the state’s ability to meet the needs of our communities and escalate long-term harm to our economy and working families.
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