UPDATE: Lt. Gov. Hosemann: Suspend Mississippi gas tax 6 months

Published 8:57 am Tuesday, March 15, 2022

Mississippi Lt. Gov. Delbert Hosemann said Monday that he and other Senate leaders are pushing to suspend the state’s gasoline tax for six months to give drivers a break as gas prices continue climbing. If passed, this cut would be the largest tax cut in Mississippi history, according to legislators.

Several states are making similar moves, and Hosemann’s announcement adds a new twist to increasingly contentious legislative discussions about possible tax breaks in Mississippi.

Republicans control the state House and Senate by wide margins, but leaders of the two chambers disagree about proposals to reduce or eliminate the income tax.

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“I’m not sure how this is going to come out,” said Republican Senator Nicole Boyd. “This is going to be an ongoing conflict.”

She stated that the upcoming week is “Conference Week,” where hopefully legislators can come to a compromise on the tax cuts.

The state gasoline tax is 18.4 cents per gallon, and money goes to the Mississippi Department of Transportation. Republican Hosemann proposes the state use money from a capital expense fund to give $215 million to the department to make up for the temporary loss of gas tax revenue.

“We can do that because we’re having a very good year in Mississippi,” Hosemann said during a news conference.

Mississippi has enjoyed robust tax collections in recent months, partly because of federal spending during the COVID-19 pandemic.

House Speaker Philip Gunn and Gov. Tate Reeves, who are also Republicans, want the Legislature to phase out the state income tax.

House Ways and Means Committee Chairman Trey Lamar, a Republican from Senatobia, said the proposal to suspend the gas tax is a political gimmick.

“The taxpayers come off substantially better from the initial phase of our income tax cut and ultimately the elimination of the income tax than a one-time, temporary pause of the gas tax,” Lamar said Monday.

Legislators face deadlines late this month to agree on tax and budget bills for the year that begins July 1. The three-month regular session is scheduled to end on April 3.

Mississippi’s income tax generates 34% of state revenue. Critics say the state can’t afford to cut taxes because it chronically underfunds education and has significant financial obligations to improve its mental health and foster care systems.

Gunn is pushing to phase out the entire state income tax. Hosemann says he wants to reduce but not eliminate the income tax.

Legislatures in several states are considering tax cuts this year.

The Mississippi House and Senate have passed separate tax cut proposals. Senate Bill 3164 would eliminate part of the income tax, while House Bill 531 would phase out the income tax over several years.

On Monday, a Senate committee inserted the latest version of the Senate plan into the House bill, and a House committee inserted the latest version of a House plan into the Senate bill.

Both plans would reduce the 7% sales tax on groceries. The Senate plan includes one-time income tax rebates of $100 to $1,000, with larger rebates going to people with larger incomes.

“Lowering the grocery tax is — I think — is incredibly important for our Mississippi families,” said Boyd. “With the rising cost of goods right now, I think if we can give them some relief in the grocery store, it will be incredibly important.”

Despite the back and forth, Boyd said the outcome looks like it will favor Mississippians.

“I think the House and the Senate can come to an agreement on that tax,” said Boyd. “I feel optimistic about it.”

Mississippi has a 7% sales tax on most other items. Senate leaders have opposed increasing the sales tax, and House leaders on Monday walked away from their proposal to increase it to 8.5%. 

The poorest Mississippi residents would see no gain from eliminating the income tax because they are not paying it now.