When Mississippi politicians brag about their good stewardship of public funds leading to an unprecedented revenue surplus, they’re a bit like the turtle sitting on the fence post boasting about its mountaineering ability.
“Mississippi continues to be in the best fiscal and fiscal shape in its history,” Gov. Tate Reeves said in his January State of the State address. “Mississippi ended the year with a billion dollars above revenue estimates. It was no accident. We kept our businesses open.”
The turtle was talking as if it had climbed the fence post by itself. Politicians talk as if they themselves created the revenue surplus. Just as the turtle had help, so did the politicians in Mississippi.
But still in his budget proposal, Reeves boasted, “Despite a global pandemic and recession, Mississippi’s economy is booming. As Democratic-run states shut down and lock down, Mississippi has opened up.
Others made similar comments.
The truth is that many Republican- and Democratic-led states are running huge budget surpluses, thanks to a confluence of circumstances related to the COVID-19 pandemic, such as a massive influx of federal funds, rising wages , a rise in prices and a general surge. economy. The budget surplus was so big in deep blue California, for example, that politicians gave people a stimulus check ranging from $600 to $1,100 and are talking about providing another one. They have enough surplus to do so. Other states – red, blue and purple – are doing the same.
Here in Mississippi, the Legislature could offer everyone currently earning a paycheck a one-time $1,000 rebate and not impact the ability to continue services at current levels.
As Republican leaders in the state debate the size and scope of the tax cuts they want to grant, an alternative proposal could be to give all workers a one-time refund instead of a tax cut. recurring tax that could have a negative impact on the economy for everyone. .
Due to an unprecedented surplus in public funds that will most likely reach more than $2 billion by the end of the fiscal year on June 30, it would not be difficult for lawmakers to grant the refund.
The problem with the tax cut proposals being debated in the Legislature isn’t that the state can’t afford it right now; it’s the uncertainty about the impact of tax cuts in 10 or 15 years.
At some point, Mississippi lawmakers learned a new trick when they passed tax-cut proposals – phase-in. For example, the tax cut passed in 2016 (the largest in state history) won’t be fully implemented until fiscal year 2028. Reeves, who was lieutenant governor in 2016 when the tax cut ‘taxes was passed, will complete his second term as governor. , assuming he wins re-election, when the tax cut is fully enacted.
Even though this tax cut is far from fully enacted, Reeves, House Speaker Philip Gunn and others are talking about tax cuts centered on eliminating the income tax, which is about one-third of the revenues of the general fund of the State. Lieutenant Governor Delbert Hosemann and his Senate allies are proposing a more modest tax cut.
All tax reduction proposals have one thing in common: they would be phased in gradually. In other words, it would be a phased introduction in addition to the current phased introduction.
According to them, a gradual introduction reduces the risks of a significant negative impact on income. During a recent Senate debate, Chris McDaniel, R-Ellisville, explained the logic of phasing in.
McDaniel said that if the Legislature had acted 13 years ago to phase out the income tax, the state could now get rid of this worrying tax and have even more revenue now than 13 years ago. years – presumably revenue primarily from retail sales tax. elements.
What politicians often fail to explain is that incomes normally always increase as wages, inflation, and presumably the number of people paying taxes increase.
But the fact remains that in red Mississippi or blue California, it takes a lot more money than it did 13 years ago to run a household or provide government services.
Mississippi, of course, has a lot of money right now. Many believe that the money should be used to meet the many needs of the state.
But if leaders are determined to return the funds to taxpayers, there are at least two ways to do so. It could be through traditional tax cuts that permanently remove income from the state revenue stream, or it could be through a one-time rebate of, say, $1,000, which could be done without affecting future recurring revenues of the state.
If the surplus continues for years to come, additional discounts could be granted without mortgaging the future of the state or knocking this turtle off its peg.
This analysis was carried out by mississippi today a nonprofit news organization that covers state government, public policy, politics, and culture. Bobby Harrison is the senior reporter for Mississippi Today’s Capitol.