Editor’s note: This essay is part of Mississippi Today Ideas, a platform for thoughtful Mississippians to share fact-based ideas about our state’s past, present and future. You can read more about the section here.

The state’s tax system plays an important role in the function of our government.  Mississippi, like all states, needs enough revenue to meet its current needs and invest in the future of its communities.

However, the state’s tax system is regressive, meaning that the state’s top income earners pay a smaller share of all state and local taxes than their share of all income. Meanwhile, the bottom 80% of the state’s income earners pay more.  

In fact, in Mississippi, families earning less than $19,300 per year – who represent 20% of the population – paid 12.4% of their income in state taxes in 2023, according to the Institute of Taxation and Economic Policy. Those earning between $19,300 and $31,500 – also 20% of the population – paid 10.8% in state taxes. In contrast, the wealthiest, the top 1% who earn more than $362,300, paid 6.9%. This disparity is particularly concerning in a state where nearly 20% of the population lives in poverty. 

Sadly, our tax system is becoming even less equitable. Currently, the 2025 Mississippi Legislature is on track to eliminate the state income tax. The plan, House Bill 1, which is pending Gov. Tate Reeves’ signature, calls for gradually reducing the 4% income tax rate by 0.25% annually from 2027 to 2030, reaching 3% in 2030. After that, further reductions would depend on “growth triggers” tied to state revenue and spending. It also includes cutting the sales tax on groceries from 7% to 5%, increasing the gasoline tax by 9 cents per gallon over three years, and changing retirement benefits for government employees hired after March 2026. 

Altogether, while this plan aims to reform the state’s tax structure, it poses significant risks to Mississippi’s long-term prosperity. Mississippi’s income tax is a major source of revenue, generating approximately $2.1 billion annually—nearly 30% of the state’s total revenue.  The 2022 income tax cuts are already expected to create a $535 million hole in the state budget once fully implemented. These cuts add to the more than 50 tax cuts totaling $577 million since 2012, according to Mississippi Today. Those tax cuts mostly benefited Mississippi’s wealthiest individuals and corporations.  

The loss of $2.1 billion in revenue would severely impact funding for education, healthcare, roads, and other vital services. For comparison, this amount is nearly equal to Mississippi’s entire K-12 education budget. It could fully cover the state’s share of Medicaid expansion for at least eight years, support at-risk hospitals, replace deficient roads and bridges, or fund policies like a child tax credit to reduce poverty—costing $1 billion less than eliminating the income tax. 

At the same time, eliminating the income tax disproportionately benefits wealthier Mississippians. Once fully phased in, less than 20% of the benefits of the 2022 tax cuts will go to families earning under $50,000. Also, the $25,500 tax cut the top 1% of Mississippians will get is more money than over a third of Mississippi households make in a year. 

Under the current plan, these disparities could worsen. If the income tax is fully eliminated as House Bill 1 aims to achieve, the state’s wealthiest residents would receive a $41,000 tax break, close to the state’s average annual salary.  Meanwhile, the average Mississippian would save just $700 per year, barely enough for a month’s groceries for a family of four. And low-income residents would save only $3 per year, according to ITEP. 

Additionally, the increased reliance on sales and gas taxes would widen income disparities. This is because as the wealthy are let off the hook from paying their fair share. This tax shift is especially severe for Black and Hispanic communities, women and rural residents, who already face higher living costs and financial challenges due to historic inequities. 

And while cutting the grocery tax may benefit everyone, the savings could be offset by other tax increases for Mississippians with lower incomes. Also, without clear and stable revenue sources at both the local and state levels, local governments should be concerned about losing crucial revenue, which could lead to budget shortfalls and further challenges, particularly in rural areas and places with higher food insecurity. 

In all, this tax cut, combined with other fiscal policy challenges like inflation, a $101 million welfare repayment to the federal government, proposed federal budget cuts at a time when Mississippi is the second most federally dependent state, and the threat of potential school voucher programs, could exacerbate financial strain for Mississippi’s families. 

Past tax cuts after the 2007-2009 recession show the potential consequences—jeopardizing funding for infrastructure, schools, healthcare and other public services.   

We can also look to states like Arizona, Kentucky and Ohio, which have faced severe budget deficits due to recent tax cuts, resulting in cuts to public services and higher costs for residents, underscoring the unsustainability of such tax policies. Arizona faces a $1.6 billion deficit due to a flat personal income tax and private school vouchers, forcing cuts to colleges, universities and public services. Kentucky’s income tax cuts are costing $1.3 billion annually, with most benefits going to the wealthiest 20%. Ohio’s revenue is down by half a billion dollars, as a result of a series of tax cuts and lower-than-projected revenue collections in the state. 

Proponents claim eliminating the income tax will attract people and businesses, but evidence shows that tax cuts don’t guarantee stronger growth. Instead, a focus on quality education, affordable healthcare, strong infrastructure and inclusive leadership is more likely to foster greater opportunity, build stronger communities and grow economies.

Instead of prioritizing tax cuts that benefit the wealthy, policymakers should prioritize building a fair and sustainable tax system, where the wealthy and corporations pay their fair share, ensuring that every family, regardless of income, has the resources necessary to succeed and thrive. 

Kyra Roby is policy analyst for One Voice, a non-profit, civic engagement organization working to give voice to marginalized and vulnerable communities across the South. 

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