Governor Signs State’s Largest Income Tax Cut
Governor Tate Reeves signed a bill that will reduce the state income tax over four years, beginning in 2023. Mississippi residents will pay lower income taxes as the state enacts it’s largest-ever tax cut.
Starting next year, the 4% income tax bracket will be eliminated. The following three years, the 5% bracket will be reduced to 4%. After the first year, the tax-free income levels will be $18,300 for a single person and $36,600 for a married couple, lawmakers said.
HB531 created the Mississippi Tax Freedom Act of 2022 which amends Section 27-7-5 of the Mississippi Code of 1972 and will:
• Reduce taxes, when fully implemented over four years, for an individual making $40,000 by $417 a year. For a married couple making $80,000, that would be $834 a year.
• Eliminate the state’s 4% tax bracket on people’s first $5,000 of taxable income starting 2023. The 5% tax on remaining income will drop to 4.7% for 2023, then 4.4% for 2025 and 4% starting in 2026.
• Give Mississippi, when fully implemented, the fifth-lowest marginal tax rate for states that have income tax — although other states are also considering cuts or elimination.
• Reduce state income tax revenue by $525 million a year starting in 2026.
The legislation contains language that the plan will be examined by 2026 with an eye toward personal income tax elimination.
For the past two years Lt. Governor Delbert Hosemann has opposed House Speaker Philip Gunn’s effort to phase out the income tax while raising sales taxes. Hosemann said they wanted more prudent, studied tax cuts instead of overhauling tax structure during uncertain economic times. Gunn vowed to continue to push for income tax elimination, but said the cuts passed are a key first step.
AMENDMENTS PER HB 531:
SECTION 1. This act shall be known and may be cited as the "Mississippi Tax Freedom Act of 2022." SECTION 2. Section 27-7-5, Mississippi Code of 1972, is amended as follows:
(b) (i) For calendar year 2023 and all calendar years thereafter, there shall be no tax levied under subparagraph (ii) 59 of paragraph (a) of this subsection on the taxable income of individuals in excess of Five Thousand Dollars ($5,000.00) up to and including Ten Thousand Dollars ($10,000.00), or any part thereof; and (ii) For calendar year 2024 and all calendar years thereafter, the tax imposed under subparagraph (iii) of paragraph (a) of this subsection upon all taxable income of individuals in excess of Ten Thousand Dollars ($10,000.00), shall be at the following rates:
1. For calendar year 2024, on such taxable income, the rate shall be four and seven-tenths percent (4.7%);
2. For calendar year 2025, on such taxable income, the rate shall be four and four-tenths percent (4.4%); and
3. For calendar year 2026 and all calendar years thereafter, on such taxable income, the rate shall be four percent (4%). It is the intent of the Legislature that before calendar year 2026, the Legislature will consider whether the revised tax rates provided for in this subparagraph (ii) will be further decreased for calendar years after calendar year 2026. If the revised tax rates provided for in this subparagraph (ii) are further decreased for calendar years after calendar year 2026 to the extent that there is no tax levied on the taxable income of individuals under this subparagraph (ii), the individual income tax shall stand repealed.