Salter: Shock over GOP tax cut agenda defies logic

STARKVILLE – So 2015 is a courthouse-to-statehouse election year in Mississippi and the state's Republican leadership is pushing and shoving to see which one of them can offer Mississippi voters – particularly Mississippi voters in the state's GOP primary Top 15 counties – the most tax relief.

That's not particularly surprising. What is surprising is the shock those proposals seem to have generated among their Democrat political opponents and the public advocacy groups that represent them.

First came Republican Gov. Phil Bryant who initially proposed a $79 million income-tax reduction aimed at people earning less than $53,000 a year. Then came Lt. Gov. Tate Reeves with a $382 million to phase out Mississippi's business franchise tax over 10 years and reduce some income taxes.

Then came House Speaker Philip Gunn with a plan to eliminate the state's $1.7 billion individual income tax over a 15-year period. The legislation contains a 3-percent revenue growth trigger, however, that could more realistically make that as much as a 30-year process.

Democrats in the House, honest brokers like Reps. Cecil Brown and Bobby Moak, exploded in criticism of Gunn's individual income tax plan. They pointed out that cutting the second largest single source of state general fund revenue in individual income tax would shift the existing state tax burden and force devastating budget cuts.

The notion that the House plan represents a tax shift is one that is, for the lack of a better word, true.

Here's why. In the state's 82 counties, 15 counties pay the majority of individual income taxes. Based on FY 2012 numbers, taxpayers in those 15 counties paid $850.7 million or 61.2 percent of the total $1.38 billion collected statewide from the 82 counties:

Hinds ($128.9 million), Madison ($106.3 million), DeSoto ($93.6 million), Rankin ($91.8 million), Harrison ($87.7 million), Jackson ($73.8 million), Lee ($48.3 million), Forrest ($44.9 million), Lauderdale ($39.5 million), Lamar ($32.1 million), Jones ($30.8 million), Lafayette ($27.8 million), Lowndes ($26.8 million), Warren ($24.08 million) and Pearl River ($21.2 million).

Based on population distributions and past voter behavior, the 15 counties listed above are the counties Republican candidates need to win in order to prevail in a Republican primary and need to carry in a general election as well.

While Hinds County is dominated by registered Democrats, Republican numbers there are such that it remains a high-profile Republican county based on the sheer number of voters.

Top Republican counties correlate as top tax-paying counties as well. Voters in those counties are in fact paying the most individual income taxes. So there's not a lot of political intrigue as to why Gunn, Reeves and Bryant are each authoring variations on a tax-cutting theme.

If, as Democrats have loudly claimed, these tax cut proposals are election year gimmicks, they are politically intelligent ones on the short term. It will be interesting to see how the Republican controlled Legislature deals with the differences in the House and Senate versions of tax cuts once conference committees have been appointed.

Scholarly research on cutting income tax is a mixed bag. The 1997 book "Growth and Variability in State Tax Revenue: An Anatomy of State Fiscal Crises" by Randall G. Holcombe and Russell S. Sobel points out that historically, Mississippi has had a "more stable personal income tax base than a retail sales tax base."

But a more relevant detail is found in research from Lake Forest College's Richard F. Dye, who recorded the growth (of lack of it) in Mississippi's tax revenues between FY 1999 and FY 2003. Only twice in that span of time would Mississippi's tax revenues growth have triggered the individual income tax cut authorized in Gunn's legislation. FY 2000, FY 2001, and FY 2002 all saw negative growth in overall state tax revenues.

Daily Caller senior editor Jamie Weinstein reported in July that supply-side economists Arthur Laffer and Stephen Moore in 2014 studied the nine "no income tax" states (Alaska, Florida, Nevada, South Dakota, Texas, Washington, Wyoming, Tennessee and New Hampshire) for population, gross state product, employment, and state and local tax revenue. Their findings? The "no income tax" states outperformed high income tax states.

Sid Salter is a syndicated columnist and director of public affairs at Mississippi State University. Contact him at (601) 507–8004 or sidsalter@sidsalter.com.