Proposed Cuts to Counties Could Lead to Regressive Property Tax Increases

March 31st, 2011

Under the cuts proposed in the Executive Budget Recommendation, one cut, in particular, – a cut to the reimbursement to cities and counties for homestead exemption – could lead to cuts in services or increases in local property taxes. Counties and cities endured cuts in Fiscal Year (FY) 2010 and FY 2011 and are facing the third year in a row where the homestead exemption has not been fully reimbursed. The map below charts the estimated revenue loss under the proposal outlined in the Executive Budget Recommendation.

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Under the budget cuts enacted in every year since FY 2008, many obligations – including education funding – have been pushed down to the local level. As a result, many counties have been forced to increase local property taxes and cut services. Local property tax increases are regressive because low-income working families pay a higher percentage of their income toward property taxes than those with higher incomes. In the short term, cuts to the homestead reimbursement should be avoided to prevent further regressive tax increases just to maintain basic services.

In the long term, the cuts first approach underscores the need for a balanced approach that includes raising revenue to create opportunities for all of Mississippi’s working families.