Frierson Takes Hard Looks at Tax Breaks and Initiative 42

You’ve got to admire Herb Frierson. There aren’t many straight shooters in Mississippi politics anymore.

Back in 2013, the House Appropriations Committee chairman called the increasing number of tax breaks coming out of the Republican legislature a big problem, noting the legislature had no way to determine the cumulative impact of such cuts over time.

As reported in the Northeast Mississippi Daily Journal, the legislature passed numerous tax breaks over a four-year period, including tax credits related to business inventories, sales tax breaks for developers building malls (which they were likely to build anyway), and a sales tax holiday for the purchase of hunting equipment.

Two weeks ago, Journal political writer Bobby Harrison reported, Legislative Budget Committee Director Debbie Rubisoff provided a look at the impact of these cuts when she addressed Frierson’s committee:

“The early projection is for state revenue to grow by 3.4% during fiscal year 2017 (July 1, 2016 through June 30, 2017). But because of previous tax breaks passed by the Legislature, 2.2% of that projected growth, or an estimated $126 million, will no longer be in the revenue stream.”

In other words, because of the tax breaks, projected net revenue growth will be just 1.2%. And, according to a chart Rubisoff provided, that $126 million deduction will swell to at least $315 million as the inventory tax benefit and others get fully implemented.

“When I said there are consequences,” Frierson said, “these are the consequences.”

Rubisoff’s information comes as revenue collections for the just ended 2015 fiscal year were reported to be up 2.4%. The legislature has budgeted a 3% revenue increase for this fiscal year. But, with the tax breaks Rubisoff described kicking in and Mississippi’s economy showing sluggish growth, actual revenue growth could come in noticeably lower.

Needless to say, none of this suggests the huge tax cuts proposed earlier this year – eliminating the personal income tax or the business franchise tax – make any fiscal sense at all.

Nor does it provide the means to fully fund the Mississippi Adequate Education Program, another concern Frierson addressed.

If voters approve Initiative 42 this fall, “my recommendation would be that we fully fund it next year,” Frierson told the Clarion-Ledger. “So we need a plan for cuts.” (Despite what proponents say, Initiative 42 makes no provisions to phase-in funding.)

Given the state’s unsettled revenue status, Frierson has directed agency heads to provide his committee information about how they would cut their budgets or raise fees to cover cuts of up to 7.8% in fiscal year 2017. (The Department of Education and Medicaid were excluded.)

While most politicians are campaigning on big tax cuts or big new spending on education, Frierson has taken a more sober approach. No doubt the Poplarville Republican is taking arrows from both sides for his hard looks at tax breaks and Initiative 42, but it’s refreshing to see at least one state leader takes the funding of state government seriously.

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