Jackson Free Press

JACKSON, Miss. (AP) — How much is too much? When it comes to tax cuts, that's the question that lawmakers and Gov. Phil Bryant must decide in coming weeks.

There are at least 17 bills still under consideration that would cut taxes or divert revenues to subsidize businesses. Three others have already been signed into law by Bryant.

The Department of Revenue says it can't tell how much all the bills would cost, but it's clear the total impact will be in the tens of millions of dollars.

Republicans say Mississippi needs to cut taxes to compete with other states and say aiding businesses will improve the economy.

"I think when you cut taxes, you actually make money," said Bryant, a Republican.

Democrats say Mississippi could spend much more on education or Medicaid expansion if Republican majorities weren't reducing taxes so much.

"They don't know what they're doing," said Sen. Hob Bryan, D-Amory, a leading opponent of tax cuts and incentives over the last two years. "They don't know how much they're spending, and they don't seem to care."

Bryan and others say what's happening is that business groups are cashing in on their support of Republicans who took over the House of Representatives in the 2011 election.

"The people who purchased the Legislature in the last election have come to collect," Bryan said.

The House, in particular, has been very receptive to tax reductions, while Lt Gov. Tate Reeves has been more cautious. At least 11 tax break bills passed the House only to die in the Senate Finance Committee. Reeves said he supports breaks when long-term benefits outweigh costs, but said that "we want to ensure that we can fund our priorities."

Mississippi has a weak system of estimating tax break costs. Many bills don't have formal estimates, called fiscal notes, prepared by legislative staff. The Department of Revenue has looked at all 20 tax bills signed by Bryant or pending, but says it can't estimate how much 15 of them will cost.

One example is House Bill 1322, which would give a $2,000 tax credit to businesses that hire military veterans.

The bill passed through the House and the Senate Finance Committee allowing a $2,000 credit each year for five years for every veteran employed. As written, the bill didn't distinguish between currently employed or newly hired veterans.

Without limits, Bryan said that 100,000 veterans could qualify, costing the state as much as $1 billion over five years. The Senate amended the bill to say the credit would only apply to veterans hired after Jan. 1, 2013.

The Pew Center on the States last year urged states to beef up cost estimates of incentives, and to use yearly limits to prevent breaks from ballooning out of control.

Jeff Chapman, a senior researcher for Pew, says figuring out who will use a tax break is hard. But analysts can offer a range of scenarios or at least try to estimate whether a bill will have a significant effect on state revenue.

"But there are states that have taken this on even through the difficulties," Chapman said.

Right now, Mississippi lawmakers are considering cutting the severance tax for the first 30 months of production on hydraulically fractured oil wells, to encourage drilling in southwest Mississippi.

Patrick Sullivan, president of the Mississippi Energy Institute, says the formation is expensive to drill in and yields less oil than formations in Texas or North Dakota.

"We need to send a clear message out from the state — we want your capital here," he said.

He cited Louisiana as an example. But the Pew report, called "Avoiding Blank Checks," singled out the 24-month Louisiana break, saying the cost to the state rose from $285,000 in 2007 to $239 million in 2010 as natural gas drilling boomed.

In Mississippi, the Revenue Department couldn't estimate the break's cost. But the state would forgo $1 million in taxes if a well produces 300 barrels a day for 30 months at $90 a barrel.

Mississippi's tax break push started in the 2012 Legislature, which Bryant continues to proclaim as "the most business-friendly" in state history. One cornerstone was a reduction in the business inventory tax, projected to cost $7 million in the 2014 budget year, rising to $14 million in 2015.

That bill was pushed by the Mississippi Manufacturers Association, also behind several significant proposals this year. House Bill 844, which is in a House-Senate conference, would eliminate the 1.5 percent sales tax on power or fuel used by manufacturers. It would cut state revenue by nearly $6 million a year, according to one of the few projections the Revenue Department has made, and cut cities' revenue by nearly $1 million.

The association pushed a much larger break, a $45-million-a-year bid to exempt manufacturers from the state's franchise tax, out of the House Ways and Means Committee. But it died without a vote in the House after objections from House Appropriations Committee Chairman Herb Frierson, R-Poplarville.

"Taxes are a necessary part of government, but we believe a lower tax rate enables employers to hire more people," said House Speaker Philip Gunn, R-Clinton. "There is a balance in there that we're trying to achieve, at the same time, to provide the services we need."

Bryant, too, said the franchise cut was too big for this year. But he's open to helping manufacturers achieve that long-held goal.

"I think there may be some ways in the future to fund that," Bryant said.