STARKVILLE — As they gather to convene the 2025 regular session of the Mississippi Legislature on Jan.7, state lawmakers face several thorny issues from a political and policy standpoint. In other words, the problems are hard to solve in and of themselves even without considering the political consequences of the solutions they choose.
The issue of Medicaid expansion divided the Legislature in 2024. The House and Senate came to loggerheads over expanding Medicaid without a work requirement. The Biden administration would not agree to a work requirement, which former President Trump approved during his first term.
With Trump returning to the White House and the GOP controlling the Centers for Medicare and Medicaid Services (CMS), lawmakers are likely to await clearer signals from Trump on whether his second administration will enact Medicaid work requirements, cut overall Medicaid spending, or both.
In either instance, state Medicaid action will almost certainly follow federal Medicaid action if any change is to take place in Mississippi in 2025.
Highway funding is another issue in which federal policy is inexorably intertwined with state policies. The U.S. Energy Information Administration reports that federal fuel tax rates remain at $0.1840/gal for gasoline and $0.2440/gal for diesel, which includes excise tax and an additional $0.001/gal from the Leaking Underground Storage Tank Fund.
The same three states had the lowest state gasoline and diesel taxes: Alaska (both at $0.0895/gal), Mississippi (both at $0.1840/gal), and Hawaii (both at $0.1850/gal).
Congress and the Mississippi Legislature are in the same shape. Fuel consumption is flat-to-declining, and fuel efficiency continues to improve, so as we drive less and get more miles to the gallon, the federal and state gas taxes don’t raise enough revenue to sustain the current transportation infrastructure or to expand and improve it.
Likewise, the political appetite for gas tax hikes is less than zero. So, the future of highway maintenance and construction is tenuous at best for the near future.
Electric vehicles exacerbate the problem. Mississippi attempts to balance the lack of fuel taxes paid by electric vehicle users by charging a $150 annual fee on all-electric vehicles and a $75 annual fee on hybrids.
Trump promised on the 2024 campaign trail a “trillion dollars” to repair the nation’s crumbling infrastructure. But seeing a GOP-controlled Congress raise federal fuel taxes will be a heavy lift. Raising Mississippi’s fuel taxes has shared that fate since the late 1980s. The National Association of State Budget Officers reports that gas tax revenue now makes up 37.6% of overall state transportation revenue, compared with 41.1% in 2018, despite increases in fuel taxes in several states.
Mississippi’s Public Employees Retirement System got help in 2024 from the lawmakers, but temporarily so. The future stability of PERS will rely on a significant retooling of the system for future state employees. Even with state officials proclaiming that past and current state employees will receive their promised benefits, any discussion of amending PERS draws fire against lawmakers in the arena of negotiating those necessary changes.
Finally, lawmakers are expected to debate additional state income tax cuts and possible cuts or elimination of the state’s so-called “grocery tax” – which actually is merely the decision to allow the state’s full 7% retail sales tax to apply on the purchase of food.
As state officials continue to carefully monitor tax collections for the next six months, lawmakers will have to determine if the state budget can absorb additional tax cuts without unintended impacts.
For the grocery taxes, municipal governments will be watching any discussion of a grocery tax cut since 18.5% of the current 7% tax is diverted to municipalities to fund local government operations.
From the day they gavel in until the Legislature reaches the sine-die deadline, expect an intense, issue-driven session.
Sid Salter is a syndicated columnist. Contact him at [email protected].
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