The apparent demise of any additional tax relief being enacted by the Mississippi Legislature comes as a major election-year surprise. A welcome surprise, but a surprise nonetheless.
Going into the 2023 session, it appeared that at least Lt. Gov. Delbert Hosemann’s more modest plan of a onetime income tax rebate would be enacted.
But a group of legislators, including more than enough Republicans, sent a message that they wanted to wait another year or more to see how things shake out before enacting any major new changes to the state tax code.
Their caution is sensible, even with Mississippi’s current record surplus of almost $4 billion.
For one, just a year ago, the Legislature enacted the state’s largest tax cut ever, a change that over the next four years will reduce the state’s personal income tax to a flat 4%. Since the income tax makes up more than a third of total state revenue, and since the 2022 tax cut was the second major reduction to the income tax since 2016, it is wise to see how the state’s treasury holds up before going too crazy.
On top of that, there are plenty of unmet needs staring Mississippi in the face, starting with the hospital crisis. So far, legislators seem willing to set aside $80 million to try to help rural hospitals, including Greenwood Leflore Hospital, survive. Few, however, think that’s going to be enough.
There are also almost certain to be steeply rising costs for corrections, mental health, foster care, public safety, infrastructure, and the list goes on and on.
Then, the threat of a national recession is not going away. So far the economy has defied expectations, but high inflation and rising interest rates eventually are going to tamp down on spending by individuals and businesses. The economy is bound to take its cyclical downward turn. The only question is whether the recession will be mild or severe.
Add it all up, and caution is the prudent course. A majority of legislators saw this, even if some of the top Republican leaders, including Gov. Tate Reeves and outgoing House Speaker Philip Gunn, couldn’t. These cautious legislators were willing to recognize that a 4% tax rate on personal income is already plenty low and they could be setting themselves up for budgetary nightmares down the road should they cut it further.
