March 11, 2016 11:31:46 AM
JACKSON -- The Mississippi Senate voted 38-10 Thursday to phase out the corporate franchise tax, reduce the individual and corporate income tax and give a tax break to self-employed people. And a House committee advanced a smaller-scale plan for individual income tax credits.
However, with state revenues falling short of expectations because of sluggish economic growth, it's unclear whether either plan will survive. Legislators are trying to put millions more dollars into a shaky foster-care system that's in danger of being taken over by a federal court, and they're considering requests for budget increases from a wide variety of state agencies.
Republican Lt. Gov. Tate Reeves said the tax-cut plan in Senate Bill 2858 will spur economic growth, but critics said it would eventually reduce revenue by 10 percent in a state where a school funding formula has been shortchanged for years.
"This is going to blow a hole in the budget," said Sen. David Blount, D-Jackson.
Senate Finance Committee Chairman Joey Fillingane, R-Sumrall, responded: "The arguments made against this bill can be boiled down to this: 'We, the government, know better than you the citizen, the taxpayer, how to spend your money.' This is elitism run amok."
Fillingane also accused Blount of "hypocrisy," saying the Democrat voted weeks ago to give a franchise tax waiver to Continental Tire, which will build a manufacturing plant in Blount's home county.
The Senate bill will move to the House, but it could falter. Early versions of House budget bills say if taxes are reduced, there must be corresponding spending cuts to meet the state's balanced-budget mandate. Fillingane said the Senate plan would reduce revenue $18 million the first year. By the end of 15 years, it would reduce revenue by $575 million annually.
Once individual income-tax cuts are complete, the maximum savings per taxpayer would be $350 a year.
Sen. Hob Bryan, D-Amory, said more than 100 of the 150 largest corporations in Mississippi already pay zero income tax.
"It may seem that voting for this bill is a politically expedient thing to do," Bryan said. But, he said, presidential primaries show many Americans are angry, and cutting taxes for corporations could feed into that anger.
"It's because deep down inside, they know something's wrong. It's that they have the sense, and reasonably so, that the fix is in, that some folks are getting a windfall and they're not being treated fairly," Bryan said.
The House Ways and Means Committee on Thursday passed House Bill 412, which would provide tax credits to families with children and with incomes of $52,000 or less. The credits would be given only in years after state revenues grow at least 3 percent and only when the state's rainy day fund is full. The fund provides a financial cushion for the budget. The bill moves to the full House for more debate.
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