Mississippi tax revenues are running short, so obviously it’s time for a big tax cut.
Yeah, despite a projected $65 million revenue shortfall this year, Lt. Gov. Tate Reeves has pushed his massive $577 million tax cut proposal through the Mississippi Senate. Reeves argues his plan to phase out the corporate franchise tax, reduce individual and corporate income taxes, and give a tax break to small business owners will spur economic growth.
“We don’t need to grow the size of government; we need to grow the size of Mississippi’s economy,” Reeves told the Clarion-Ledger. “And we do that by allowing the taxpayers to keep their money to invest in their communities.”
Sounds nice, but evidence suggests such tax cuts don’t spur economic growth enough to make up for the tax cuts.
“The record is clear that tax cuts have not boosted growth,” says a Brookings Institute report, pointing particularly to tax cuts in Kansas and Louisiana.
In 2012, Kansas governor Sam Brownback argued tax cuts would be “like a shot of adrenaline into the heart of the Kansas economy.” Brookings found the tax cuts did not produce hoped-for growth and more revenue was lost than originally anticipated. Fiscal year 2014 revenues were $700 million lower than FY 2013 — $330 million less than expected – during a period in which growth in most of the American economy accelerated.
Then there is the dismal fiscal situation in next door Louisiana. “Louisiana’s budget is a hot mess,” reported the Times-Picayune. Former governor Bobby Jindal pushed big tax cuts through the legislature when he took office. Bookings noted seven years later, the state budget had gone from a $1 billion budget surplus to a $1 billion shortfall. Universities and other state services face massive budget cuts. (Yes, part of the shortfall is from declining oil and gas revenues, but only part.)
USA Today even spoke out on the issue. “Big tax cuts come back to bite states,” the newspaper said. “The obsession with slashing taxes, budget be damned, is crazy.”
So, will the Mississippi House go along with the Senate’s “crazy” tax cuts?
Not if they listen to the conservative position of House Appropriations Committee Chairman Herb Frierson.
Frierson has proposed putting in each budget bill a provision that would require “a pro rata reduction in each agency to offset any tax cut,” reported Bobby Harrison of the Northeast Mississippi Daily Journal. “I am not anticipating any tax cuts…,” Frierson said. “This is just to keep everybody honest. If you vote for a tax cut, you vote to cut the budget. I am not going to bet on the come line anymore.”
“To be honest I don’t have a lot of confidence in growth.”
Political promises notwithstanding, there are only two sensible times to cut taxes. One is when revenue is booming, not the case now. The other is when tax cuts will be more than offset by permanent spending cuts, also not the case now.