- Associated Press - Friday, May 13, 2016

JACKSON, Miss. (AP) - Gov. Phil Bryant on Friday signed what may be the largest tax cut in Mississippi history, a measure that will reduce taxes by $415 million over the next 12 years.

Senate Bill 2858 will phase out Mississippi’s $260 million-a-year corporate franchise tax, a long-held goal of business groups. It would also cut $145 million in income taxes, raising the threshold for paying state income taxes to $10,000. Anyone making that much would eventually get a $150-a-year cut. Both the income tax and franchise tax reductions would begin in 2018.

Starting in 2017, Mississippi would lower taxes on self-employment, cutting $10.2 million over three years.

“I appreciate the legislature’s continued commitment to reducing the tax burden on our citizens and making Mississippi the most business-friendly state in America,” Bryant said in a statement.

Supporters including Lt. Gov Tate Reeves say the measures make Mississippi more economically competitive, particularly the elimination of the franchise tax, which some other states are also getting rid of. Businesses, especially manufacturers and banks, dislike the franchise tax because the levy taxes capital and requires companies to pay regardless of profit levels. House Ways and Means Committee Chairman Jeff Smith, R-Columbus, has said the first year of the franchise tax cut will leave only 245 businesses paying the tax.

Opponents warn tax cuts will drain off state revenue, hurting Mississippi’s ability to provide needed government services. Democrats also questioned the wisdom of approving tax cuts while revenues were declining. Lawmakers approved more than $350 million in business tax reductions during the previous four-year term, and business tax collections are already projected to fall $150 million from 2015 to 2017.

House Speaker Philip Gunn, R-Clinton, has promised a comprehensive tax study before the large tax cuts begin in 2018, and Reeves has said he supports it. Many House Republicans voted for the measure reluctantly, after the collapse of efforts to find a grand bargain that would have also increased funding for roads and bridges. Republicans also shelved an effort to rewrite the state’s K-12 funding formula after closed-door talks on changes didn’t produce an agreement. Transportation and education spending could also be part of the overhaul effort.

“I look forward to working with the legislative leadership on comprehensive tax reform for the 2017 legislative session that further simplifies the tax code and ensures a steady stream of revenue to fund the core responsibilities of government,” Bryant said.

Like most other proposed income tax cuts, benefits from the Mississippi plan would flow most to high-earning households. Projections from the liberal-leaning Institute on Taxation and Economic Policy show the lowest-earning 20 percent of taxpayers, making $16,000 or less, would save an average of $14 a year. Those earning in the top 95 percent to 99 percent of households, with incomes from $156,000 to $324,000, would collect an average of $271 a year. That’s in part because high-income households are more likely to have two earners.

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