Gov. Tate Reeves released his proposed budget today and the biggest item is the phaseout of the state’s income tax.
The phaseout, which would begin in 2022, would eliminate the 4 percent rate on taxable income over five years and eliminate the 5 percent rate on all taxable income exceeding $10,000 by 2030. The reason for the phaseout starting in 2022 under the governor’s plan is that is when the 3 percent bracket — which was addressed by the $400 million Taxpayer Pay Raise Act of 2016 — will finally be eliminated.
In fiscal 2020, the state's income tax collections added up to $2.2 billion.
The 2016 law also started the elimination of the state’s franchise tax, which will be completed by 2029. This tax is assessed on capital or property and the rate is now down to $2 per $1,000 from the original tax, which was $2.50 per $1,000. The tax will be reduced by 25 cents per $1,000 annually until it is eliminated.
Reeves also proposed:
- $3 million in additional spending for the Mississippi Law Enforcement Training Academy.
- $12 million for “Jump Start” grants for small businesses up to $5,000 per business.
- $3 million for a Patriotic Education Fund to support teaching K-12 children.
- $2 million for computer science training for teachers.
- $3 million to fund more mathematics coaches for public schools.
- $28 million for the School Recognition Program that provides raises for teachers in A- and B-rated districts or those that improve from an F to a D or a D to a C.
- $50 million on workforce development.
Large reductions in spending compared with fiscal 2021 ($7.298 billion) to $6.125 billion in the governor's proposed budget reflect the end of one-time CARES Act federal funds ($1.2 billion) for COVID-19 relief. These funds must be spent by December and any unused funds allocated to agencies will go back to the state’s unemployment trust fund.
The governor’s budget recommendation is only one component of the budget-making process. State agencies submit budget requests by August 1 and executive directors justify their funding requests to the Joint Legislative Budget Committee. The committee also receives estimates of the state’s tax revenues for the upcoming fiscal year, which starts on July 1.
The JLBC meets in November to put together a budget (which will act as a guide for the appropriation bills drafted late in the upcoming session for each agency). It will release its budget proposal in December.
