Smith May Bring Up His Own Tax Cut Plan

By Bobby Harrison/Daily Journal Jackson Bureau

JACKSON – If legislators are going to pass a broad-based tax cut during the 2015 session, at least one chamber must vote on a proposal by Wednesday.

That is likely to occur since Lt. Gov. Tate Reeves, who presides over the Senate, has proposed a $380 million tax cut phased in over multiple years that would lower taxes for large and small businesses and for individuals paying taxes on income.

But Reeves’ proposal is far from the only tax cut plan floating around this session – in advance of this November’s elections.

Fellow Republican Gov. Phil Bryant announced an income tax cut for lower wage earners before the session began, but since Bryant has praised Reeves’ proposal.

“As I’ve said, I am open to any idea that puts money in the pockets of working Mississippians, and I thank Lt. Gov. Reeves for joining me in this effort,” Bryant said when Reeves announced his proposal.

House Ways and Means Chair Jeff Smith, R-Columbus, said he has committed to considering Reeves’ business tax cut proposal if it passes the Senate this week and advances to his committee. But in the meantime, Smith said he might have his Ways and Means Committee and perhaps the full House consider his proposed income tax cut.

Smith said he will propose reducing a person’s income tax liability by increasing the amount of money a person must earn before paying taxes.

A person currently pays a state tax rate of 3 percent on the first $5,000 of taxable income, 4 percent on the next $5,000 and 5 percent on the next 10 percent.

Some income is exempt from taxes. For instance, a person can claim children as an exemption and can claim a head of household exemption.

Smith is proposing raising each tax bracket $5,000, meaning a person would have to earn more money before the 3 percent, then 4 percent and finally 5 percent tax brackets kick in.

“It is simple and I feel like it will help the middle class,” Smith said.

While each person’s state tax liability is different, based on factors, such as exemptions, Smith estimated the tax savings for an individual earning $50,000 per year would be $450.

Smith estimated his proposal would cost the state general fund about $78 million.

Reeves’ income tax proposal is to eliminate the 3 percent tax on a person’s first $5,000 of taxable income.

He has proposed doing that over a five-year period at a cost of $130 million to the treasury.

It is not clear whether Smith would propose a phase-in of his plan.

But the reality is that any final tax cut legislation would be hashed out in conference committee composed of leaders from both chambers.

The wild card in any election year tax cut plans could be the Democrats. After all, it takes a three-fifths majority to pass a tax cut.

In the Senate, Republicans have exactly a three-fifths majority at 32-20. In the House, Republicans hold a much slimmer 66-56 majority.

Rep. Bobby Moak of Bogue Chitto, the House minority leader, said it is likely that Democrats might be working on some proposals that possibly could be offered during debate on the floor.

Plus, Moak said there is the question of whether a tax cut is wise considering the many costly needs facing the state.

“We need to talk about the fact they say we don’t have the money to fund education, to stop hospitals from closing yet they are coming up with this political chicanery,” Moak said.

Reeves said his plan “encourages capital investment in our state and promotes long-term economic growth.”

But others disagree.

“This is not the time for corporate tax cuts,” said Corey Wiggins, director of the Mississippi Economic Policy Center. “Instead, we need to make investments in what matters most to all Mississippi families like funding public education, making quality health care available to every Mississippian and making it easier for families to send their children to college.

“Tax cuts like this one will undermine these building blocks of our economy and prevent us from creating a better future for our state.”

The other aspects of Reeves’ proposal is:

• To phase out the franchise tax, which is a tax on businesses’ property and capital, over a 10-year period at a cost of $242 million.

• To reduce the taxes on small businesses by $9 million over a three-year period.

Various business groups have gotten behind the plan.

The Mississippi Economic Council, which is the state’s chamber of commerce, has said studies conclude the franchise tax was “one of the roadblocks Mississippi faces in economic development.”