Jackson Free Press

JACKSON, Miss. (AP) — Mississippi Gov. Tate Reeves says he is not ruling out the possibility of calling a special legislative session to seek elimination of the state income tax if the House and Senate reach an impasse on the issue.

Legislators face deadlines late this month to agree on tax and budget bills for the year that begins July 1. The three-month regular session is scheduled to end April 3.

The Republican governor said Friday that that he tries to limit special sessions to issues of “significant importance."

“I do think the elimination of the income tax is an issue that certainly could rise to that level,” Reeves said at a news conference.

Mississippi is one of the poorest states in the nation, but it has enjoyed robust tax collections the past several months, partly because of federal spending during the COVID-19 pandemic.

“Eliminating the income tax will make Mississippi more competitive,” Reeves said.

Mississippi’s income tax generates 34% of state revenue. Critics say the state can’t afford to cut taxes because it chronically underfunds education and has significant financial obligations to improve its mental health and foster care systems.

House Speaker Philip Gunn is pushing to phase out the entire state income tax. Lt. Gov. Delbert Hosemann, a fellow Republican, advocates eliminating some, but not all, of the income tax.

Legislatures in several states are considering tax cuts this year, including South Carolina, where a bill to reduce the income tax has received bipartisan support.

The Mississippi House and Senate have passed separate tax cut proposals. Senate Bill 3164 would eliminate part of the income tax, while House Bill 531 would phase out the income tax over several years. At least one of those bills must survive a Wednesday deadline to keep the issue alive during the regular session.

Both bills would reduce the 7% sales tax on groceries. Both would reduce the cost of car tags, with a larger reduction proposed by the House. The Senate bill includes one-time income tax rebates of $100 to $1,000, with larger rebates going to people with larger incomes.

Mississippi has a 7% sales tax on most other items, including clothing. The Senate plan would not change that, but the House plan would increase it to 8.5%.

Increasing the sales tax would have a disproportionally larger effect on people with modest incomes. The poorest residents would see no gain from eliminating the income tax because they are not paying it now.