Tupelo Daily Journal. November 26, 2022.
Editorial: Lawmakers should consider tax break on baby supplies
In his executive budget proposal, Gov. Tate Reeves called for the complete elimination of the state income tax. This has been a bad idea for the past few years when House Speaker Philip Gunn called for it, and it remains a bad idea today. Simply put, Mississippi cannot afford to cut off that much revenue and still provide adequate services long term to its citizens. Furthermore, at a time when hospitals are failing, we have more urgent investment needs than broad tax cuts.
At the same time, targeted tax cuts can be effective and helpful tools in aiding Mississippians during specific times of their lives. One idea being tested in Florida is a tax break on certain baby and toddler supplies. While Florida Gov. Ron DeSantis has called for a permanent repeal of sales tax on those items, lawmakers decided to test the measure in a year-long tax break.
The 2022-2023 Children’s Diapers and Clothing Sales Tax Exemptions — which began July 1 and runs through June 30, 2023 — is aimed at goods for children 5 and under. Qualifying items include clothing, apparel, shoes and diapers.
Mississippi lawmakers should consider going further by including baby formula and food; specific supplies like baby wipes, pacifiers and ointments; and even certain furniture and accessories like cribs, bassinets, strollers and even playpens.
In his executive budget proposal, DeSantis listed other items such as paper towels, toilet paper, laundry detergent, hand soap and trash bags — all items that families spend hundreds of dollars on annually and that the use of which increase exponentially with children. These are all ideas worth considering.
Working with childcare experts, lawmakers could likely find other financial incentives and tax exemptions that would provide needed and worthwhile assistance to parents of young children.
There is the concern of creating a complicated system of items that are or are not tax exempt, which very likely would require technology upgrades to manage and perhaps even a change in how the state classifies certain retail goods. But these are not insurmountable problems, and they certainly should not be seen as deterrents to helping Mississippi families.
Finally, such a plan in Mississippi would go well with efforts to address the needs with an expected increase in births after the overturning of Roe v. Wade. It would target a specific group of Mississippians who could use and benefit from financial assistance. And, importantly, the negative impact to our state budget would be limited, especially when compared to a broad plan like the full elimination of the state income tax.
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Greenwood Commonwealth. November 25, 2022.
Editorial: Next Budget Up By $500 Million
Earlier this month, Gov. Tate Reeves and leaders of the Mississippi Legislature agreed that the general fund revenue estimate for the upcoming 2024 fiscal year would be $7.52 billion — an increase of about $500 million from the current year’s estimate.
It’s one sign that Mississippi government is flush with cash, largely due to two years’ worth of federal assistance during the COVID-19 pandemic. Aid to businesses and individuals also spurred greater spending, which in turn increased the state’s sales tax revenues. By many reports, the state received $2 billion more in taxes over the past two years than it expected.
Keep in mind that all the extra consumer spending increased demand for many goods, and thus increased prices. Over the last few months, federal price measurements say that inflation is running at an 8% annual rate. Mississippi’s projected revenue for next year amounts to a 7% increase, so state leaders basically are expecting the state to keep up with inflation, but nothing more.
Without the extra money, if the governor and lawmakers had held the revenue estimate at this year’s $7 billion, the Legislature would have had to make some substantial cuts during its 2023 budget negotiations. If inflation keeps going like it has been, that $7 billion just won’t buy what it used to.
A story about the budget on the Mississippi Today website made one other valuable point: Officials crafted this revenue estimate based on a consensus from five state financial experts, including the state economist. They believe the state’s revenue growth is going to slow down; the $7.52 billion revenue estimate is about even with forecasts for taxes that will be paid to the state this year.
Slower revenue should not be a surprise for at least two reasons. First, a small state like Mississippi does not increase revenue by $1 billion a year, as it did the past two years. Gains that large simply are not sustainable, especially since the federal COVID assistance has largely ended.
Also, there have been plenty of predictions that the country is on the brink of a recession, when economic growth declines for a period of time. Interest rates are rising, and that is designed to discourage borrowing. The goal is to cool off the economy, but if the Federal Reserve gets too chilly, things could get worse.
The state’s revenue estimate is just Step 1 in the budget process. Now Reeves and lawmakers have to decide how the money gets spent.
Perhaps the most interesting political battle of 2023 will have on one side the governor and House Speaker Philip Gunn, who both favor eliminating the state income tax; and Lt. Gov. Delbert Hosemann, who wants to use part of the surplus for a one-time rebate to taxpayers, on the other side.
The fact that next year’s revenue estimate is a cautious one further reinforces the conclusion that Hosemann’s approach is the more sensible path to follow.
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