Mississippi eliminates state income tax
Mississippi has officially eliminated its state income tax, following legislation signed by Governor Tate Reeves. This critically important change, described by Reeves as a momentous occasion for generational change, is aimed at fostering economic growth by encouraging businesses and entrepreneurs to invest in the state. The legislation will phase out the income tax by reducing the current rate incrementally from 4% to 3% by 2031, contingent on certain economic growth performance indicators.
Despite the enterprising goals, there are concerns about the potential impact on the state’s budget, with estimates suggesting a loss of $2.6 billion from the current budget due to this tax elimination. Analysts warn that this could leave Mississippi vulnerable, especially given that the income tax comprises a substantial portion of the state’s revenue. Critics highlight that this reform primarily benefits wealthier residents in a state that already struggles economically. Mississippi now joins the ranks of other states that do not impose individual income taxes.
Mississippi eliminates state income tax
Gov. Tate Reeves (R-MS) signed legislation Thursday eliminating the state’s income tax.
“Today is a day that will be remembered not just for the headlines, not just for the politics, but for the profound generational change it represents,” Reeves said at the bill signing. “I must say, it feels like it’s been a long time coming, but after many, many, many years of hard work, we can all stand together and say that we have accomplished income tax elimination in the state of Mississippi.”
Reeves shared that the legislation will be a catalyst for bringing businesses and entrepreneurs to the state.
“We are saying to entrepreneurs, to workers, to dreamers: Mississippi is open for business, and we will not penalize your success,” Reeves said. “We are going to compete, and we are going to win.”
A previous bill reduced the income tax rate to 4%, but this legislation will reduce it by .25% each year beginning in 2027. By 2031, the rate will reach 3%, and it will only be reduced further if certain revenue “growth triggers” are met.
The stipulations around meeting economic growth targets before reducing the income tax further were enacted to ensure the state would be properly founded. The state’s income tax makes up a third of its revenue.
Neva Butkus, a senior analyst at the Institute on Taxation and Economic Policy, estimated the state will lose $2.6 billion from its current $7 billion budget as a result of phasing out the income tax.
The tax cuts came as the Trump administration seeks to overhaul federal funding, cutting billions of dollars for social programs.
“What the state is essentially committing to is a very extreme and dramatic loss of revenue during a very tumultuous time during which the state might be reckoning with large federal cuts to social programs that many Mississippians rely on,” Butkus told Mississippi Today. “And they’re doing all of this while creating a windfall for the state’s wealthiest residents in the poorest state in the union.”
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The legislation’s phrasing essentially allows the tax cut to occur immediately, regardless of whether the state is on target for its “economic triggers.”
Mississippi is now the 10th state not to levy individual income taxes, joining Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.
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