Week of March 17, 2025: All Eyes on Income Tax

The Mississippi House of Representatives reconvened at 4:00 PM on Monday for the eleventh week of the 2025 legislative session. Lawmakers began with a moment of silence for those lost in recent severe storms.

On Tuesday, March 18, the House met the deadline for action on appropriation and revenue bills from the other chamber. Several bills advanced to the conference stage, where the committee chairmen will appoint members to finalize legislation.

Two resolutions honored public service: HR 78 recognized former Representative Wanda Jennings, and HR 82 paid tribute to Representative Charles Lemuel Young Jr. I had the honor of serving with Rep. Young for 5 years before his passing, but I worked with him prior to me coming into the legislature. He was more than a colleague; he was my friend and mentor. He is dearly missed.

The House passed major fiscal policy bills aimed at tax reform and infrastructure funding. I voted no on both tax reform measures. The first one is SB 3095 which proposes gradually reducing state income tax rate to 2.99% by 2030 while cutting the sales tax on groceries to 5% starting in 2025. To offset revenue losses, excise taxes on gasoline and special fuels will increase from 2025 to 2027, with some redirected toward infrastructure.

HB 1, the “Build Up Mississippi Act,” introduces tax changes and revenue reallocations:

Tax Reform Measures

• Income Tax Reduction: The state income tax rate will decrease by 0.25% annually from 2027 to 2030, reaching 3%, with further reductions contingent on revenue growth and budget conditions, aiming for full elimination.

• Grocery Sales Tax: The sales tax on groceries will drop from 7% to 5%, effective July 1, 2025.

• Fuel Tax Adjustment: Gasoline and diesel taxes will increase by 9 cents over three years, reaching 27.4 cents per gallon. Beginning July 1, 2029, adjustments may occur biennially, capped at 1 cent per gallon, based on federal highway construction cost averages.

• Legislative Compromise: The fuel tax adjustment was essential to securing legislative approval for the broader tax relief package.

• Fiscal Impact: The plan delivers a net tax cut exceeding $1 billion. For most households, grocery tax savings will offset or surpass fuel tax increases.

• Taxation Model: The changes promote a user-based taxation system, shifting the burden from direct taxation of labor to consumption-based contributions further perpetuating a regressive tax system.

PERS Reform

• Current Members: No changes to benefits or cost-of-living adjustments (COLAs) for existing Public Employees Retirement System (PERS) members.

• New Employees: Individuals hired after March 2026 will enter a Tier 5 hybrid retirement plan, integrating a reduced defined benefit with a defined contribution component, alongside additional state contributions.

• Long-Term Stability: The new tier aims for full funding by 2064, preventing a projected $20 billion deficit by 2075 under the current structure.

Looking ahead, the next major deadline is March 27, to concur or not to concur on amendments from other house to general bills and constitutional amendments.

The House is set to reconvene Monday at 4:00 PM.