A slight downward trend in state revenue continued in May, but the state remains in a strong financial position to fully fund the budget lawmakers set for the current fiscal year in 2023.
However, revenue data may suggest that future legislative goals may face some uphill battles as income tax revenues continue to decline.
What are the state revenue figures?
According to a report issued by the Legislative Budget Office, the state’s fiscal year revenue collections to date total $6.9 billion, which is approximately $17.9 million less than what was collected at this point in 2023.
LBO publishes state revenue reports monthly, reflecting the state’s financial position for the previous month and fiscal year to date. Mississippi‘s fiscal year begins July 1 and ends June 30.
The state personal income tax, as reported by LBO, amounted to $2,040,348,272 so far this year, $155,651,893 less than as of May 2023, which represents a drop of 7.09%. The Corporate Tax collected $819,215,747, compared to $890,963,506 in May 2023, falling 8.05%, or $71,747,758 in just one year.
Despite the decline in income tax collections, state sales tax revenues improved in May. The tax reached $2,571,951,896 at the end of May for this year, showing a 3.14% increase over fiscal year May 2023 collections ($2,493,710,426). Other taxes also saw growth, such as the insurance premium tax and use tax.
With a net revenue loss totaling more than $220 million from personal and corporate income taxes alone, state officials could rejoice that accrued interest on state investments totaled $126 million this fiscal year, up $62,048,596 million from fiscal year 2023.
How do tax numbers align with Republican goals?
The drop in income taxes is largely due to a phase-out of the tax passed by the Mississippi Legislature in 2022, which will be reduced to a 4% personal income tax by fiscal year 2026. At that time Supporting stronger cuts, several lawmakers said revenue losses from the taper and future cuts would be offset by growth in sales tax revenue.
More on income tax cuts in 2022The income tax cuts are unlikely to pass this legislative session. See why
According to May’s figures, that justification has not yet panned out as Republican lawmakers expected.
House Speaker Jason White, R-West, meeting with reporters in May at the Mississippi State Capitol in Jackson, said he is planning to cut the state’s 7% food tax in half, gradually reduce the state’s personal income tax and find a new way to fund the Mississippi Department of Transportation.
Currently, MDOT is funded primarily by an 18.4 cents per gallon tax on motor fuel.
“Between eliminating the personal income tax and cutting the grocery tax, we’ll probably, of course, have to consider the sales tax and how we divert it to cities,” White said. “The gas tax that we charge per gallon, you know, is there room for improvement? You’re going to see a lot of discussion.”
The man who previously occupied White’s podium, Philip Gunn, R-Clinton, also attempted to phase out the income tax, but failed to convince Senate leaders to eliminate it entirely without further substantial overhaul of the structure. state tax.
Read about White’s plan for 2025.MS House Speaker Jason White speaks to reporters at the end of the session and celebrates with his colleagues
When asked if the state could even afford a new income tax cut in light of a historically high $7.9 billion budget, which included a $2.95 billion K-12 education funding package, White said it’s feasible.
“I think the state can afford a reduction,” he said. “We continue to have these huge surpluses. Now, we’ve been spending that money and using it on things like huge capacity projects at MDOT… But as we have those surpluses, there will be conversations about tax cuts. Certainly, we want to fund our system educational, and I think we have shown it. I am not saying that throwing money is the end of everything, but I think that in addition to the reforms, I think we have shown that we are willing to finance it.
White also formed a special committee to study the state’s tax structure, which could meet in the summer or fall to study the idea further.
Grant McLaughlin covers state government for the Clarion Ledger. He can be reached at gmclaughlin@gannett.com or 972-571-2335.
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