Gov. Tate Reeves told lawmakers in his second State of the State speech that his goal is for the state’s economy to compete with the best-performing states such as Florida, Georgia, Tennessee and Texas.
Reeves spoke at the state Capitol Tuesday and said he plans to sign any pay increase for teachers that lawmakers send him.
Two ways that Reeves said the state’s economy can compete with the aforementioned states is by eliminating the state’s income tax and by spending more on workforce development.
“I believe that in order to fully capture the potential of this historic moment, we must think big. We need a bold move,” Reeves said. “This is the time for an action that will turn heads all across the country and get money and people flowing in. And I believe that move is the elimination of the income tax.
“It is a reward for our hard workers, and an incentive for others to invest here, to grow here, and to live here.”
The phaseout, which would under the governor's plan 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 be struck from the books.
Florida, Tennessee and Texas do not levy a state income tax on their citizens. According to the annual Rich States Poor States study by the right-leaning American Legislative Exchange Council that measures economic competitiveness among the states, Mississippi’s economic outlook ranked 20th best in 2020, bettering Alabama (23rd), Arkansas (22nd) and Louisiana (30th), but worse than Tennessee (eighth best), Texas (15th best) and Florida (seventh best).
The same study says Mississippi still has progress to make to catch up to those states, with the second-worst performing economy in the 2020 report. Texas had the nation’s best-performing economy, with Florida (sixth best) Georgia (10th best) and Tennessee (ninth best).
Eliminating the state’s income tax would cost the state about $2 billion in tax revenue, which represented 35.23 percent of the state’s general fund budget in fiscal 2021.
“There are still many who say that we can’t lower taxes because it puts new government spending at risk,” Reeves said. “And I understand that it is often good politics to act like something from the government is a gift. The far left has played that tune for generations.
“But we have to be clear: The government does not have anything that it does not first take from a taxpayer.”
Reeves also said that he supports school choice and that he made the right decision to reopen Mississippi’s public schools amid the COVID-19 pandemic.
He also said the state has gone from worst in the country with delivery of the COVID vaccine to operating at peak capacity with 200,000 vaccines delivered.
Video of the speech can be found here.