Mississippi has made history as the first state in the U.S.—aside from oil-rich Alaska—to pass legislation aimed at phasing out its income tax.
This monumental achievement, spearheaded by Governor Tate Reeves and House Speaker Jason White, marks a significant victory for the state. The newly passed bill outlines a plan to eliminate the income tax over the next decade, starting with incremental cuts and followed by a series of budget-driven "triggers."
Beginning next year, Mississippi’s income tax rate will drop in 0.25 percent increments, sliding from 4 percent to 3 percent by 2030. After that, further reductions will hinge on the state’s budget surplus. Given Mississippi’s recent track record of substantial surpluses, the income tax could vanish entirely by the mid-2030s.
So, how did Mississippi become such a trailblazer? It very nearly did not happen.
The push to eliminate the income tax has been a cornerstone of Governor Reeves’ agenda, with serious legislative efforts kicking off in 2022 under then-House Speaker Philip Gunn.
Gunn’s genius was to simplify the state’s variable tax rates into a flat 4 percent on income above $10,000. While this didn’t eliminate the tax outright, it leveled the playing field for Mississippi households, setting the stage for broader support of full elimination.
Fast forward to this year, when Speaker Jason White and Representative Trey Lamar introduced a plan to phase out the income tax by 2037. Their initial proposal included a partial tax swap, offset by modest increases in gas and sales taxes.
What happened next was both fascinating – and, if you support income tax elimination, rather fortuitous.
The Mississippi Senate has been a constant drag on conservative reform. They have either opposed, or come to grudgingly accept, almost every conservative policy proposal over the past few years, from school choice to red tape reduction. So, too, with income tax elimination.
The Senate, reluctant to fully embrace income tax elimination, opted for a cautious approach. They amended the bill with a "trigger" mechanism, tying future tax cuts to significant revenue growth outpacing spending increases. Some in the Senate perhaps saw this as a clever stall tactic—until a fortunate blunder turned the tables.
The Senate miscalculated the formula, placing a decimal point in the wrong place. Math matters. Something the Senate designed as a brake on tax cuts turned out to be an accelerator.
Unless the state government runs a deficit, future surpluses will likely drive steady cuts, and Mississippi – despite the Senate leadership's best efforts – will be as competitive in tax terms as Tennessee and Texas.
Set aside the soap opera, this is great news for our state. Already there is evidence that in 2024, by some measures, Mississippi performed well economically, and may have been one of the fastest growing states in America that year. This tax reform will only add to this Mississippi momentum.
Perhaps what the senators' math missteps show is that Mississippi now needs to turn its attention to education reforms. If the Senators stopped blocking school choice the way they tried to block income tax elimination, maybe math standards might be better both inside and outside the legislature.
Douglas Carswell is the President & CEO of the Mississippi Center for Public Policy.
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