Mississippi lawmakers vote to abolish income tax but made mistakes

• Lawmakers passed a bill to phase out the state’s income tax by 2030. But, the bill contained a mistake.

• An oversight in the bill’s revenue triggers could result in faster tax rate reductions than intended, as noted by analysts and confirmed by lawmakers.
• The House has held the bill for reconsideration to potentially amend the error before sending it to Gov. Tate Reeves for approval.

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Mississippi lawmakers passed legislation that would eventually phase out the state’s income tax. However, the bill language contains a mistake that would trigger drops in the rate more quickly than planned.

An amended House Bill 1 passed in the House by a 92-27 margin on Thursday. If signed by Gov. Tate Reeves, it would decrease the state’s income tax by 0.25% annually until it reaches 3% in 2030. The tax would drop further based on how much more tax revenue the state brings in than it spends. The bill also lowers the state’s grocery tax from its current 7% to 5%. 

To compensate for some lost revenue, the bill would gradually increase the state’s gas tax to 27 cents per gallon by July 2027.

The House and Senate had separate plans to cut the income tax, but senators amended and returned the House version for concurrence. 

The mistake

The Tax Foundation’s Jared Walczak pointed out the potential error Thursday morning, noting that the triggers for the years after 2030 in which the state would cut the income tax would be much smaller than the revenue drop from the cut.

“Let’s say each point on the rate is worth $460 million (ballpark),” he posted to X. “Growth of 0.85% of $460 million is ~$4 million. The cost of a 0.2% rate cut is $92 million!”

Mississippi Today confirmed the error with multiple lawmakers, saying the .85% should have been 85%. 

House lawmakers chose to hold the bill for reconsideration instead of sending it to Reeves for consideration. It’s unclear if they’ll amend the bill or pass it and change the law before the mistaken revenue triggers take effect in the coming years.