City and County Taxes Need Study too

Legislative leaders, having passed one of the largest tax cuts in state history, now say they will conduct a comprehensive study of Mississippi’s tax structure.

“This session we had proposals that were just all over the map — proposals to reduce the grocery tax, proposals to eliminate the franchise tax — sales taxes, corporate income taxes, a whole host of different proposals on taxes,” House Speaker Philip Gunn said. “I want to spend between now and next session coming up with a comprehensive approach — which will probably include the tax (cuts) we just passed … to come up with a fair tax system that will create a steady stream of revenue.”

Revenue shortfalls this year and projected for next year plus the pending tax cuts will make finding that “steady stream of revenue” a challenge.

That’s a challenge mayors and supervisors have been facing for years, with little empathy from legislators.

Revenues available to local governments are strictly controlled by the Legislature. Revenues generally available to municipalities are a portion of the sales taxes they collect, local property taxes, and local fees and fines. Revenues generally available to counties are local property taxes, state aid road funds, and local fees and fines.

Sales taxes are rebated to municipalities based on a formula set by the Legislature. Property tax millage can be set by municipalities and counties, but annual increases are limited by the Legislature. Ever increasing costs for road and street repairs, schools, and public services have resulted in ever increasing property taxes.

Many mayors see property taxes as the greatest hindrance their communities face for small business development and expansion.

Legislators have been worse than reluctant to provide other options to local government for additional revenues.

Municipalities’ efforts to gain authority to implement local option sales taxes go nowhere. This year a modest request to increase the portion of sales taxes going to municipalities from 18.5% to 20% passed the Senate unanimously and the House 109 to 11, but failed in conference as state revenue problems surfaced. The small increase would have been phased in over two years and the money targeted to infrastructure improvements – streets, bridges, sewers, and such.

If legislators do conduct a comprehensive tax study, the study should include local governments. There are issues of fairness and sufficiency as well the impact on business development that should be reviewed. City taxpayers pay double for many services (e.g. law enforcement and government administration). Sales taxes in many small towns have declined substantially as the Walmarts and big box stores in nearby larger towns take customers away from local businesses. Counties face growing infrastructure and law enforcement challenges as more and more homeowners choose to live outside of municipalities.

And, then, there is that elephant-in-the-room issue of local schools constantly raising property taxes due to less than adequate state support.

Yep, there’s lots to study.

Perhaps legislators could include an addendum on how many studies they have conducted and then ignored. That might be useful too.

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