After several years of discussions, the Mississippi legislature will address the subject of sales tax on groceries this session.
Mississippi is one of just 13 states that tax groceries and because groceries in our state are currently taxed at the same 7% rate as other products, Mississippi has the nation’s highest grocery sales tax rate.
The legislature’s grocery sales tax reduction is part of House Bill 1, a projected $1.1 billion tax cutting orgy that will trim the grocery sales tax to 4.5% next year while incrementally cutting the tax to 2.5% over the following 10 years, HB-1 will also phase out the state’s personal income tax.
I wouldn’t trust the Mississippi legislature to organize a two-car funeral, so even before I read the bill my skepticism prevented me from getting very excited about this plan. Sure enough, House Bill 1 is essentially a shell game, shifting the tax collection from one source to another and leaving it to citizens and local governments to bear whatever bad consequences follow.
Even at 2.5%, Mississippi would still have the eighth highest grocery sales tax in the nation.
This may be a tax cut regular folks and local governments can’t afford.
It creates an enormous challenge for local governments, most of whom rely on sales taxes, including sales taxes on groceries, to fund services and operations. That’s especially true for smaller cities, towns and counties which have smaller, less diverse retail sales bases. In many towns, the tax revenue produced by the sale of groceries represents a very high percentage of the total sales tax revenue. So, in true Mississippi fashion, the poor get poorer.
As indifferent to that as they are, the politicians in Jackson realize they can’t just ignore that problem altogether, so HB-1 will create a new local 1.5% general sales tax to make up for that lost revenue. Local governments have the option of opting out of the additional tax, which is not going to happen.
That means the effective general sales tax rate will be 8.5%, 11th highest in the nation. Special local taxes drive sales tax even higher. For example, If you eat a meal in Starkville, you will be paying 9.5% in sales tax on that meal. Eat a meal in Columbus, you pay 10.5% in sales tax. Restaurants are going to just love that.
It would have been far simpler for the state to increase the amount of total sales tax revenue it returns to local governments from the current 18.5% to 20%. That’s still an increase of 1.5%, after all. That ought to arouse your suspicions.
What it tells me is that the state doesn’t want to return any more general sales tax revenue back to communities to make up for the decrease in grocery sales tax receipts. It also suggests that legislators know a local 1.5% general sales tax increase will not make local governments whole. But, hey, that’s their problem, right?
The whole thing is a hot mess.
No one knows how much grocery tax revenue would be eliminated by HB-1. That also means no one knows the impact it would have on the budgets of local governments. Nor does anyone know if the average person will wind up paying less sales tax than before, which was the whole purpose of this bill.
HB-1 is likely to turn out to be a bait-and-switch designed so that the politicians in Jackson can brag about cutting taxes on groceries. They will get all of the credit, but suffer little of the consequences. Those unintended consequences will fall squarely on citizens and local governments.
No one should be opposed to reducing or even eliminating sales tax on groceries. We just don’t want the legislature giving with one hand and picking our pockets with the other, which is what HB-1 will do.
The House is poised to vote on this bill soon.
If HB-1 passes, Mississippi will have the eighth highest grocery sales tax rate in the nation and the 11th highest general sales tax rate.
So, if you don’t like the idea of paying a 8.5% sales tax on most of the things you buy, but don’t eat while still having one of the highest grocery sales tax rates in the nation, you had better not waste any time in letting your state legislators know it in no uncertain terms.
Slim Smith is a columnist and feature writer for The Dispatch. His email address is [email protected].
Slim Smith is a columnist and feature writer for The Dispatch. His email address is [email protected].
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