A bill that would phase out the state income tax in Mississippi and reduce sales tax on groceries, while raising the general sales taxes, is getting some pushback from local business owners and at least one local legislator who say it would seriously harm retailers.
On Tuesday, the Mississippi House of Representatives voted 85-34 to pass HB 1439, largely along party lines. All of the Golden Triangle’s Republican representatives — Dana McLean and Lynn Wright of Columbus, along with Rob Roberson of Starkville voted for the bill. Democrats Kabir Karriem (Columbus) and Cheikh Taylor (Starkville) voted against the bill.
The bill now goes to the Senate. To pass, the legislation would require three-fifths approval of both chambers.
It figures to face fierce opposition in the Senate, said Sen. Chuck Younger (R-Columbus).
“It’s a piece of trash,” Younger said. “It’s robbing Peter to pay Paul, only you’re doubling the taxes on the other end. I can’t believe (House Speaker) Philip Gunn would do such a stupid thing. It’s going to kill car dealers, restaurant dealers, tractor dealers, everything. Everybody on our side (the Senate) is upset about this.”
If passed, the legislation would phase out state income tax over 10 years, beginning with the lower tax brackets. Currently, the average Mississippian pays $1,760 in state income tax annually, a figure that represents $2 billion, about one-third of the state’s budget.
To compensate for that loss of revenue, HB 1439 will increase the state general sales tax from 7 percent to 9.5 percent.
At 7 percent, Mississippi has the 22nd highest sales tax rate in the nation. With the 2.5 percent increase, the state would have the fourth highest rate, according to The Tax Foundation, an independent tax policy nonprofit organization.
The bill would also increase sales tax on automobiles by 50 percent — from the current 5 percent to 7.5 percent.
Meanwhile, the sales tax on restaurants in Columbus, where state and local sales tax is a combined 9 percent, would jump to 11.5 percent. In Starkville, the combined sales tax in restaurants would come to 12.5 percent. Both cities have a local sales tax levied specifically on prepared food and beverage sales.
On the bright side, the bill reduces sales tax on groceries from 7 percent to 4.5 percent through 2024 and will be cut to 3.5 percent by 2027. Mississippi is one of just 13 states that have sales tax on groceries and is one of just three states (Alabama and South Dakota being the others) that collect grocery purchases at the same rate as its general sales tax, according to the Center on Budget and Policy Priorities.
McLean said the good in the bill outweighs the bad, specifically referring to how eliminating the income tax and grocery sales tax over time will benefit state residents.
“It basically puts money back in the pockets of Mississippians,” she said. “If you make $50,000 a year, that means you’re getting back $2,000. You can make your own decision about how you want to spend that money.”
Asked whether increasing sales tax on restaurants while reducing the tax on groceries — at a time when COVID-19 has hurt restaurants and increased grocery sales — was a good idea, McLean stopped short.
“You know, that’s a good point, something I hadn’t considered,” she said. “Restaurants have really suffered during this pandemic and are still suffering. If the Senate wants to make restaurants exempt from the increase, that’s something I’d be agreeable to.”
Business owners concerned
Local business owners, especially those who deal in big-ticket items, said the legislation could hurt their businesses.
“I guess there are pros and cons in the legislation,” said Dusty Dupler, owner of Performance Marine in Columbus. “But it will definitely hurt our business. The market in our area is struggling already. Right now, we have customers who are struggling just to make the down payment.”
Dupler, who has been in business since 1989, said most of the boats he sells run in the $15,000 to $25,000 range.
“What you would be looking at is another $400 to $650 in sales taxes,” Dupler said. “I definitely think that would hurt our business. In other parts of the country, boat sales are blowing and going. But here, business is down from where it was in the 1990s. As it is right now, the state tax commission makes more on a boat I sell than I do.”
The increase in sales tax on automobiles could have a negative effect on car sales, too. That’s bad news not only for car dealers, but for the city of Columbus, where sales tax on car sales is a huge part of the city’s revenue.
“For a lot of people, coming up with that extra sales tax money, then paying $700 or $800 for a car tag, that puts them in a really difficult position. So, yes, I do think it would hurt business. We’ve emailed our representatives and asked them to vote no on the bill,” said Stan Gunnels, sales manager at Bill Russell Ford in Columbus.
Slim Smith is a columnist and feature writer for The Dispatch. His email address is firstname.lastname@example.org.
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