January 17, 2022

Volume XII, Number 17

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January 15, 2022

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January 14, 2022

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Mississippi House Revisits Income Tax Phase-Out for 2022

Today the Mississippi House of Representatives filed and passed out of the Ways and Means Committee H.B. 531 which appears to represent the House leadership’s income tax elimination proposal for the 2022 session.  The bill, which is 294 pages long, appears to have the following primary features:

  • Quantifies the amounts by which actual fiscal year 2021 general fund collections exceeded original estimates ($1.1B excess), and projects additional excess collections for fiscal year 2022;

  • Immediately increases the personal income tax exemptions from $12,000 to $75,400 for married/joint filers, from $6,000 to $37,700 for single filers, and from $9,500 to $36,600 for heads of households;

  • Provides an inflation-adjusted “trigger” formula, based on a $6.175B collections baseline, for additional increases in personal exemptions and eventually the full elimination of the individual income tax based on relative state revenue growth (no specified time line, all based on mathematical calculations);

  • Enacts an offsetting increase in the general sales tax rate on tangible personal property and taxable services from 7% to 8.5% (less than the 9.5% proposed in 2021);

  • The increased 8.5% sales tax rate also will be applicable to certain other specific items such as entertainment/amusement charges, alcoholic beverages, telecommunications services, specified digital products, and software, music, games, etc. delivered electronically;

  • Makes no change to many of the special sales tax rates applicable to farmers, manufacturing machinery and equipment, railroads, electric power associations, etc. (a particularly sensitive issue in the 2021 proposal);

  • Offers an immediate cut in the sales tax rate on groceries from 7% to 5.5%, with an additional five-year phase-down to 4% with that lower rate effective as of July 1, 2028;

  • Diverts a portion of the new sales tax increases into a new motor vehicle ad valorem tax credit fund, and authorizes a new credit against the cost of car tags;

  • Incorporates new grant mechanisms into the Advantage Jobs Tax Credit and the Mississippi Major Economic Impact Withholding Rebate Incentive programs to account for the potential impact of the income tax withholding reductions on existing agreements under those programs; and

  • Brings forward, without current change but for possible future amendment, numerous additional statutes containing income tax definitions, certain income tax credits, most sales tax exemptions, state gas severance tax, and certain economic incentive programs.

Readers may recall the robust debate during the 2021 session over income tax repeal and the extensive discussions and public meetings during the remainder of the year to gather information and ideas for a renewed proposal this session.  The changes in the current proposal appear to reflect some of the feedback obtained through that process.

A vote of the full House may come as early as Wednesday afternoon. 

© 2022 Jones Walker LLPNational Law Review, Volume XII, Number 12
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About this Author

John Fletcher Tax Lawyer Jones Walker Law Firm
Partner

John Fletcher is a partner in the firm's Tax & Estates Practice Group and practices from the Jackson, Mississippi office. With more than twenty years' experience in the legal, corporate, and accounting arenas, his practice focuses primarily on state tax matters, encompassing Mississippi, Louisiana and multi-state income, franchise, sales, use and local ad valorem taxes.

He is a contributor for Cooking with SALT, a legal blog committed to providing timely insights on recent legal and practical developments concerning clients...

601-949-4620
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