Individual Taxpayers Should be Wary of Tax Reform Schemes

Legislative leaders brought in an outside expert from the Tax Foundation to push the theory that Mississippi needs to make its business taxes more competitive. She argues lower business taxes, offset by higher user fees, property taxes and expanded sales taxes, will make Mississippi more competitive for business and jobs.

While this approach may make the state more business tax competitive, there is no evidence it will result in more business growth and jobs. Taxes are just one of the many factors businesses consider when looking to expand or open new locations. Market size, wealth, competition and growth prospects; workforce size, skills, wage levels, and future availability; transportation and utilities access and costs; quality of schools and other lifestyle amenities; incentives; and other factors are equally if not more important than business taxes.

Mississippi is already more competitive with its business taxes than it is in many of these other areas. The reality is our market size is small and wealth level is low. Our workforce availability is limited, our overall skill levels low, and our pipeline of future qualified workers from our schools needs improvement. Our transportation infrastructure is in crisis.

Indeed, Mississippi will end up worse off if overdone business tax cuts result in less money for workforce, schools, and transportation.  They need more funding, not less, if Mississippi is to become truly competitive.

Individual taxpayers should be especially wary. After all, who else will bear the tax load shifted off businesses?

While individual taxpayers would be losers from the tax expert’s recommended schemes, out-of-state corporations, not surprisingly, would be winners. While touting itself as an independent voice for prudent tax policy, the Tax Foundation’s annual report displays its increasing bias toward business. “Businesses Need Tax Reform” it proclaims, then touts its annual “State Business Tax Climate Index” and efforts to spur pro-business tax reform around the country. Individual tax equity is not touted.

Note, Mississippi’s corporate taxes already rank highly competitive on the business climate index at 12th.

As legislators struggle to cope with persistent revenue shortfalls and what to do about pending business tax cuts, they rummage anxiously for spending cuts.

Interestingly, the day after Mississippi Today reported legislators may take away the $9.4 million the Department of Health spends on tobacco control programs, the University of Mississippi Medical Center’s monthly Pediatric Update expressed alarm about tobacco’s impact on children.

“68,000 children living in our state may ultimately die prematurely from smoking and related health risks,” said the update. “The annual number of kids who become new daily smokers in Mississippi is nearly 4.5 times higher when compared to annual numbers for the United States as a whole. Data like this reinforces the need for interventions focused on prevention.”

Prevention is the primary goal of the Department of Health’s program.

Shortsighted cuts can have long-term consequences, as this one would have for children and children’s Medicaid, overdone business tax cuts would have for Mississippi’s overall competitiveness, and over-taxed individuals would have for future elections.

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