Mississippi is joining Kentucky in becoming one of the first states in nearly a half-century to remove income taxes.
Mississippi Governor Tate Reeves is taking a victory lap.
A year and a half after fending off Democratic challenger Brandon Presley in deep-red Mississippi by just three points, the second-term governor is celebrating a major change to his state’s tax code — phasing out the individual income tax for all Mississippians.
Following a 2016 tax package that eliminated the 3 percent individual income tax bracket and another in 2021 eliminating the 5 percent individual income tax bracket, the governor directed the legislature to eliminate the income tax entirely in the coming years. In doing so, Mississippi is joining Kentucky in becoming one of the first states in nearly a half-century to remove income taxes since Alaska did so in 1980.
Republican legislators in a handful of other states, including Missouri and Oklahoma, have also signaled recent interest in phasing out the income tax over time, believing that the move will attract new residents, boost workforce participation, and create jobs.
The Build-Up Mississippi Act, which Reeves signed into law in late March, will reduce the 4 percent bracket to 3 percent by 2030 on incomes exceeding $10,000 per year no matter what happens with state revenue, with plans to phase out income taxes entirely over time.
The Mississippi model includes triggers that are conditional on revenue and spending targets — what Reeves describes as a strategy that accounts for a slowdown in revenue to avoid challenges that other states have faced in similar tax overhauls. For instance, “If revenue in fiscal year 2029 is greater than expenditures in 2030, then the income tax will be reduced by three tenths of 1 percent,” the governor explained in a wide-ranging sit-down interview with National Review on a recent trip to Washington, D.C. “It’s a ten-year phase, and we think that’s very manageable.”
The legislation also changes the sales tax on groceries from 7 percent to 5 percent beginning July 1, while increasing the tax on gasoline by nine cents per gallon over a three-year period.
“We just believe very strongly that government should take less so that our people can keep more of their of what they earn,” he added.
This is a major feat for Reeves, the former lieutenant governor who narrowly won reelection despite low approval ratings and a well-funded opponent. Counting runoffs, primaries, and general elections, this fixture in Mississippi politics has been on the state ballot 15 times in over a 20-year period. “And fortunately, have not yet been beat,” he says with a smile.
During Reeves’s most recent off-year election cycle, his Democratic challenger — a former public utilities commissioner, former mayor, and cousin of Elvis Presley — pledged on the campaign trail to expand Medicaid in Mississippi, which is consistently ranked one of the poorest states in the union.
Reeves, by contrast, has been a staunch opponent of expanding the entitlement for able-bodied adults. He notes that Mississippi is one of just ten states that have not expanded Medicaid under the Affordable Care Act, and he says that the state has seen a slight uptick in workforce participation rate over the past two years. And he believes that this issue is inextricably tied to the income tax phase-out.
“We believe if you want more of something, you ought to tax it less,” he says. “Mississippi needs more income. Our people need more income. And we need more income earners in the population. We need to look at our workforce participation rate, and we need to see it increasing. And to do that, you need more people in the workforce.”
Speaking with National Review, the governor also suggested that he’s sympathetic to the GOP governor-led efforts in some states to exempt soda and some sugary snacks from SNAP benefits, arguing that these policies may be effective in lowering states’ obesity and diabetes rates. “To the extent that we can encourage and incentivize more healthy behavior through restrictions on what can be spent or what can be purchased with SNAP benefits, I think that is a good thing,” he said.
Pressed on the second-order effects of these policies, Reeves conceded that these kinds of policies inevitably prompt food lobbyists to lobby for exclusions from SNAP regulations. “Also, there is a there is a part of me which says, in general, it bothers me that the government is going to pick winners and losers and choose for individuals,” he said. “The only reason it is acceptable in this case is because these are specifically government benefits that are being handed over.”
But broadly speaking, he’ll continue to oppose any expansions to Medicaid as part of a broader strategy of increasing workforce participation. “Entitlements are incentives for those amongst us that need them, but they’re also incentives in some areas for individuals that should be in the workforce but are paid not to by the federal government,” he said.