In a Monday press conference on Facebook Live, Mississippi Governor Tate Reeves laid out an ambitious plan to eliminate the state’s individual income tax in the upcoming legislative session starting in January. The tax, levied at a maximum rate of 5%, was trimmed in 2016 when the Legislature eliminated the 3% tax bracket levied on the first $5,000 of income. That phase out is scheduled to be complete by 2022, after which time Mississippi will levy a 4% tax on income from $5,000 to $10,000, and a 5% tax on all amounts in excess of $10,000, with the first $5,000 of income not taxed. The elimination of the 3% bracket and the remaining rate brackets apply to both corporate and individual taxpayers.
Under the Governor’s plan, the state would phase out the existing 4% rate bracket over the next five years, and then the top 5% bracket by 2030, after which there would be no individual income tax.
Individual income tax receipts in the upcoming 2021 fiscal year are expected to account for just over $2 Billion – roughly 35% – of the state’s total $5.5 Billion in tax revenue. When coupled with the ongoing phase-out of the corporate franchise tax, elimination of the individual income tax will put significantly more pressure on the sales and corporate income taxes to fund the state’s coffers.