Proposal: eliminate income tax, add 5% tax on gas, allow cities, counties to levy local sales tax

It noted that Income taxes are subject to more fluctuation in the economy, but they have more potential for growth. Sales taxes, according to the report, are more stable because they’re directly linked to consumer spending, but they have only limited potential for growth.

The report concluded that Mississippi is transitioning to a more consumption-based tax structure. The report noted that consumption-based taxes primarily impact low-income earners the most because poorer people spend more of their overall income on goods and services.

As an example, the report illustrated that one person who makes $5,000 and another person who makes $10,000 spend $1,000 on goods that are subject to the same sales tax. Both of these individuals will pay $70 in taxes.

“In this example, the first individual pays an average of 1.4% of his or her income in sales taxes, while the second individual pays an average of 0.7% of his or her income in sales taxes—thus meeting the definition of a regressive tax,” the report reads.

The bill will first go toward the House Ways and Means Committee for consideration, which is led by Republican Rep. Trey Lamar of Senatobia. Lamar, a champion of income tax elimination, wrote on social media that the tax cut bill was one of “the most transformational pieces of legislation” the state has ever seen.

Lamar had not scheduled a committee meeting, but Speaker White has said the House would consider the bill early on in the 2025 session.

Robert Johnson III, the House Democratic leader, said he is keeping an open mind about the legislation and still reading over it, but he believes Mississippi still has a lot of needs that government leaders need to address with tax revenue.

“I know I have needs in my district that have yet to be met that the state hasn’t answered or said we don’t have the money for,” Johnson said.

If the bill passes the full House, it would likely head to the Senate Finance Committee for consideration, which is led by Republican Sen. Josh Harkins of Flowood.

Harkins told Mississippi Today that he had not yet reviewed the House’s tax cut package and had no response to it. He also plans to advance a Senate tax cut package out of his committee in the coming weeks.

If the Legislature compromises on a tax cut plan, it would head to Republican Gov. Tate Reeves for consideration. It’s unclear if the governor supports the House’s latest tax cut proposal.

Reeves at a Wednesday press conference reiterated that his main priority is eliminating the income tax, but he is generally supportive of all tax cuts.

However, the governor said he does not support tax cut plans that increase another type of tax and has in the past opposed any “tax swaps.”

While the House’s latest plan is an overall net tax reduction, it still adds a new local sales tax and adds a new 5% tax on gasoline. Reeves on Monday morning thanked White and Lamar for wanting to eliminate the income tax, but only said their latest plan was “serious.”