Will eliminating income tax grow Mississippi?
Published 6:18 pm Friday, June 4, 2021
Gov. Tate Reeves, House Speaker Philip Gunn and others who tout eliminating Mississippi’s personal income tax as a way to reverse the state’s population loss must explain DeSoto County.
They cite growing states with no income tax like Texas, Florida and even Tennessee as what can happen if Mississippi would only eliminate its income tax.
“Mississippi needs to make a bold move to attract new business and residents,” Reeves said late last year in proposing the phase out of the income tax.
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But the question of DeSoto County remains. DeSoto County is unique in that it has gone head-to-head against an area with no income tax on wages and has won in terms of population growth.
DeSoto has been one of the fastest growing counties in the state for decades. At one point, it was the state’s fastest growing county and for a sizable portion of time earlier this century was one of the fastest growing counties in the nation.
Yet, DeSoto County in the extreme northwest section of Mississippi borders Tennessee where there is no income tax. To be precise, during much of DeSoto’s growth, Tennessee did tax some dividends and interest, but did not levy a tax on wages. And that tax on dividends and interest has been phased out recently.
DeSoto’s growth has far outpaced its neighbor across the border to the north in Tennessee.
It has been well documented that much of the growth in DeSoto County has come from an exodus of people from across the state line in Memphis — people moving from a state with no income tax on wages to a state with an income tax.
Between 2010 and April 2019, DeSoto County grew by 14.7%, according to the Census Bureau, while Shelby County, Tenn., home of Memphis, grew by 1%.
Between 2000 and 2010, DeSoto County grew 50.4%.
People were not exactly scared away from DeSoto County because of its income tax rate. No, according to most accounts, people were attracted to DeSoto County because of its good schools, affordable housing and overall quality of life.
Many have argued that schools, health care and other services that the government plays a role in providing are more important to most than a tax rate as long as that rate is reasonable. And, it should be pointed out, while Mississippi does have an income tax like 40 other states, it is one of the lowest in the country.
Overall, Mississippi was one of three states nationally to lose population during the past decade. The other two— West Virginia and Illinois — like Mississippi, have an income tax. The governor in West Virginia, like in Mississippi, is proposing eliminating the income tax as a method to attract residents to his state. West Virginia Gov. Jim Justice said eliminating the income tax could result in an amusement park — the next Disney — locating in his state.
Mississippi’s tax system already is set up to lure retirees to the state. Most retirement income, including Social Security, is not taxed by the state, and on the local level people age 65 and over also get a sizable break on the taxes they pay on their residence.
Reeves proposed late last year phasing out Mississippi’s income tax, which accounts for about one-third of the state’s general fund revenue. Speaker Gunn, who often has touted the elimination of the income tax, proposed a far-reaching restructuring plan during the 2021 legislative session that entailed increasing Mississippi’s already high sales tax rate while reducing the tax on groceries and eliminating the income tax.
Gunn has been traveling the state since the 2021 session ended in April touting his proposal. Some observers believe that Gunn as he travels the state also is lining up to be a potential challenger to Reeves in the 2023 Republican primary for governor.
Lt. Gov. Delbert Hosemann, who presides over the Senate, has said in theory he supports reducing taxes, but has only committed to the Senate Finance Committee studying the state’s tax structure before the 2022 session begins.
As part of that study, lawmakers should look at the history of DeSoto County, one of the few Mississippi counties to experience population growth during the past decade.
And for those who will contend that much of the movement from Memphis to DeSoto County was white flight: That’s too simplistic an answer. Between 2010 and 2019, DeSoto County’s Black population grew from 21% to 30%. In 2019, DeSoto County elected its first African American to the Legislature.
People of all races have been leaving a state with no income tax on wages to a state with an income tax. Perhaps DeSoto County spoils the claim that cutting the income tax is the answer to population loss.
Bobby Harrison is Mississippi Today’s senior Capitol reporter.