Smart Tax Policy Seems Unlikely for Road and Bridge Fix

Will our reluctant legislators finally get off their duffs and do something to fix roads and bridges across Mississippi?

Gov. Phil Bryant called Friday for a special session on August 23rd to deal with the issue.  House Speaker Philip Gunn and Lt. Gov. Tate Reeves still have not found common ground on the issue, formerly a prerequisite Bryant had for the session. Heaven forbid that all those other legislators would do something without Gunn’s and Reeves’ permission.

A recent report from the conservative Tax Foundation stated, “Currently, 28% of Mississippi roads are in poor condition, and 12% of bridges are deemed as structurally deficient. An estimated $400 million a year in additional revenue is needed to compensate for these inadequacies.” Bryant closed 83 unsafe bridges in April.

The Tax Foundation says “smart tax policy” includes having the “lion’s share of transportation funding” come from user fees and user taxes. Mississippi fuel taxes and user fees covered 36% of local and state spending on roads and bridges in 2014, putting the state in the bottom quartile nationally.

Gunn seems to agree with the foundation and has recommended options to increase fuel taxes. His latest offer was to swap an increase in fuel taxes for a decrease in income taxes.

Reeves, along with Bryant, wants no fuel tax increases.

“While raising a gas tax is often unpopular, aligning user fees, like a gas tax, with the associated spending projects, like road construction, is a sound financing approach for states,” says the Tax Foundation.

This has been the conservative approach to financing necessary government services for years.

So what course, if any, will our legislators’ choose?

Gunn’s proposal is a watered down version of a tax swap proposed earlier by Rep. Charles Busby of Pascagoula. Busby proposed eliminating the 4% tax bracket on personal and corporate income and phasing-in higher fuel taxes – three cents a gallon per year for four years on gas and five years on diesel. Gunn proposed two cents a gallon for four years for both. Both proposals would index fuel taxes to inflation.

The Tax Foundation thought well of Busby’s plan, which aligns with its “smart” tax policies, saying, “The swap would allow Mississippi to transition from taxes on income to taxes on consumption and final users, reducing burdens on investment and aligning the government services taxpayers benefit from to the taxes used for their expenses.”

The Speaker may have backed off Busby’s plan because it would reduce income tax collections about $165 million while increasing fuel taxes about $302 million. Given that Mississippians pay all of the income taxes but a significant percentage of fuel taxes are paid by out-of-state travelers and truckers, these amounts look about right. Gunn’s watered-down proposal makes the amounts about even.

News reports say the tax swap looks DOA. That leaves a new state lottery, Internet sales taxes, state bonds, and such as possible sources of revenue.

These options, according to the Tax Foundation’s perspective, would not be smart. Of course, doing the smart thing is seldom our Legislature’s way.

Meanwhile, as legislators have piddled and puckered on this issue, local governments have started raising property taxes to fix closed bridges.

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