The Mississippi State Legislature is debating how to deal with declining tax revenues, after meeting with government agency heads and soliciting suggestions for tax reforms.
Throughout November and December, lawmakers on a special committee chaired by state Rep. Phillip Gunn (R-Clinton) called for budget relief recommendations from state government agency heads, such as Mississippi Department of Revenue Commissioner Herb Frierson.
At a November 2016 meeting of the committee, Frierson recommended increasing the state’s taxes on alcohol sold by the government and legalizing and taxing sports betting to boost state government revenues.
In November 2016, state tax revenue was almost 9 percent short of projections and 2.5 percent below the amount collected during the same month in 2015.
Says Tax Hikes Unnecessary
Forest Thigpen, president of the Mississippi Center for Public Policy, says he’s confident the state’s lawmakers will reject calls for tax increases.
“Lawmakers often discuss tax increases to offset spending issues, which Mississippi has faced for a couple of years,” Thigpen said. “I think we are headed in the right direction to get our state budget in order without raising taxes. I’m encouraged that our legislative leaders seem to be intent on continuing in that direction.”
Thigpen says the tax committee is considering spending cuts.
“The legislative budget committee’s proposal calls for a 3 percent cut in the budget for next fiscal year, which will begin next July,” Thigpen said. “If they stick to that proposal, the state’s rainy day fund would get back some of the money that was taken [in 2015 and 2016] to make up for a shortfall in expected revenue. That’s a realistic budget, based on expected revenue for next year and the uncertainty of the economy.”
Cites Consumer, Producer Burdens
David Burton, a senior fellow in economic policy with The Heritage Foundation, says tax hikes, such as Frierson’s proposed alcohol tax increase, are bad for consumers and producers.
“Some of the taxes will be borne by the consumers, and some will be borne by the producer,” Burton said. “The quantity consumed is going to go down, but some of it will be at the expense of consumer surplus, and some of it will be producer surplus.”
Opportunity for Reform
Burton says Mississippi lawmakers should look carefully for opportunities to make tax reforms.
“I have yet to see a government that wasn’t laced with stuff that could be fixed to save money,” Burton said. “They probably have tax preferences in their sales or income taxes that you could use to cut the rate, which would help the climate in the state, and there are probably a lot of things that could be done to improve the tax system.”