- Associated Press - Monday, February 9, 2015

JACKSON, Miss. (AP) - Embracing one of the business community’s long-held tax reduction goals, Lt. Gov. Tate Reeves will propose eliminating the franchise tax on business capital Tuesday as part of a larger package of tax cuts.

Senate Finance Committee Chairman Joey Fillingane, R-Sumrall, confirmed to The Associated Press that Reeves will propose on Tuesday a phased-in elimination of the $220-million-a-year franchise tax. He said it also will include tax relief for individuals.

“I think you’re going to see, once the plan is unveiled, that all the taxpayers in the state are going to get relief,” Fillingane said Monday.

A spokeswoman for the Republican Reeves didn’t respond to requests for comment Monday. The individual tax cuts were less clear, and Fillingane declined to provide details.

Sen. Debbie Dawkins, D-Pass Christian, said business tax breaks aren’t reaching average people.

“It’s supposed to encourage job production, but I don’t see it happening in my community,” Dawkins said.

With state revenues having climbed back from recession lows, tax cuts are much on the mind of lawmakers as the 2015 elections approach. Republican Gov. Phil Bryant is also endorsing the elimination of the franchise tax. House Ways and Means Committee Chairman Jeff Smith, R-Columbus, said House members are discussing a 10-year phase-out of the franchise tax, and said he also expects an individual income tax cut.

The franchise tax is a 2.5 percent levy on business property or capital employed. Industries like banks and manufacturers dislike franchise taxes because they apply whether a business is profitable or losing money. According to Tax Analysts, a publication on taxes, 18 states impose a franchise tax. West Virginia and Pennsylvania have become the latest to repeal theirs in an attempt to court business.

If the Mississippi plan succeeds, it will kill a second large tax that businesses have long sought to cast off. In 2012, lawmakers agreed to phase out the state’s tax on business inventory. By 2017, the Legislative Budget Office projects its elimination will cost the state $126 million in lost revenue.

Mississippi lawmakers have passed 34 bills granting more than $350 million in tax relief since 2012, according to calculations by the Legislative Budget Office and the AP, with the vast majority going to businesses. At the same time, lawmakers keep falling far short of funding K-12 schools and community colleges at levels demanded by law. Lawmakers would have to add $450 million to next year’s budgets to meet funding promised under the Mississippi Adequate Education Program and promises made to community colleges. Reeves and House leaders are angling to add more than $100 million to K-12. Mississippi has also declined to expand Medicaid and faces decaying roads.

“With the economy rebounding, we need to make sure we’re investing in the things that create jobs like education and health care and not cutting corporate taxes,” said Corey Wiggins, director of the liberal-leaning Mississippi Economic Policy Center.

The tension between cutting taxes and spending more has been evident in early crafting of the 2016 budget, which won’t be finalized until April. House Appropriations Committee Chairman Herb Frierson, R-Poplarville, has repeatedly warned lawmakers not to give away money they want to spend.

Frierson said he’d withhold judgment on Reeves’ proposal, but said Monday he’s “conflicted” by the push and pull.

In November, Bryant proposed cutting income taxes for some Mississippi households earning less than $53,000 a year. That tax break would only apply in years when state revenue grew and the state’s main savings account was full.

Lawmakers have largely ignored Bryant’s proposal. Last week, the Republican governor wrote to Reeves and House Speaker Philip Gunn, R-Clinton, urging its consideration. He also wrote that he was open to other ideas “to return money to working people,” including cutting the franchise tax.


Follow Jeff Amy at: https://twitter.com/jeffamy

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