Kansas is “an example of what not to do in tax reform,” an economist from the Tax Foundation told Mississippi lawmakers Thursday.
“They basically just slashed revenue in the state,” and that left Kansas officials with little idea of how much revenue the state will collect from year to year, said economist Nicole Kaeding.
As Mississippi lawmakers evaluate the state tax system, they should look at Indiana, North Carolina and Washington, D.C., as success stories, Kaeding said. Those two states and the city phased in changes, including cuts in corporate and personal income taxes.
The Washington-based foundation analyzes federal, state and local taxes. Although it bills itself as nonpartisan, the Tax Foundation has been criticized by liberal groups such as the Center on Budget and Policy Priorities, which said in 2013 that the foundation “mischaracterizes or exaggerates” the findings of studies on state and local taxes.
Kaeding didn’t make policy suggestions, but she pointed out that Mississippi does not tax some goods, such as prescription drugs, or some services such as getting a dog groomed or hiring an attorney.
During the spring, the Republican-led Legislature voted to phase out Mississippi’s $260 million-a-year corporate franchise tax and to cut $145 million in income taxes, raising the threshold for paying state income taxes to $10,000. Those reductions begin in 2018. Lawmakers also voted to lower self-employment taxes, cutting $10.2 million over three years beginning in 2017.
Mississippi revenue has fallen short of expectations the past several months. Republican Gov. Phil Bryant made budget cuts during the year that ended June 30, and many Democratic legislators have said tax cuts are a bad idea.
House Speaker Philip Gunn and Lt. Gov. Tate Reeves, however, have supported the tax cuts and have appointed groups of legislators to examine state taxes and spending.
Gunn, R-Clinton, said Thursday that Kaeding’s presentation bolsters the case for the direction the Legislature is going.
“So much of the conversation has been ‘corporate tax breaks result in bad revenue situations,’ and I just don’t think that’s what she said,” Gunn said. “In fact, it helps to spur growth, and that’s where we’re headed.”