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Special panel tackle taxes, budget

August 2nd, 2016

By: Geoff Pender | The Clarion-Ledger

House Speaker Philip Gunn and Lt. Gov. Tate Reeves say they want to see Mississippi’s taxes shift from income-based to user-fee and also want more intensive legislative scrutiny of state government spending.

The two leaders on Monday presided over the first meeting of numerous new legislative “working groups” that will meet for the rest of the year and make recommendations for comprehensive tax and budget reform. Gunn and Reeves will serve as co-chairs of an 18-member bipartisan tax committee. Ten other committees will scrutinize the spending of most major state agencies.

“I’d like to see more of a user-based (tax) system than income-based, because I think everybody ought to have skin in the game,” Gunn said to the crowd of lawmakers, lobbyists and government staffers. On spending, he said, “We’re not on a witch hunt here. At least not yet.”

But critics say Mississippi already places a heavy tax burden on the poor and lower-income families and such a shift would increase it. Numerous state agency leaders have said budget cuts for last fiscal year and this year have hamstrung their agencies’ work.

Reeves said he, Gunn and Gov. Phil Bryant “are all on the same page on working to ensure a tax code that encourages economic growth, not discourages it.”

“We need more taxpayers, not more taxes,” Reeves said.

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Gunn said that the GOP legislative leadership over the last five years has “gotten our financial house in order” but that “It seems like we have taken a shotgun approach to taxes.”

Reeves and Gunn said they foresee the end result of the tax reform work will be some taxes and fees raised, some lowered, some eliminated and some government functions turned over to the private sector. They both said they hope the end result is less taxes overall and a “flatter, fairer” tax code with more user fees and less income taxes.

Mississippi currently relies heavily on sales taxes, for more than 36 percent of state revenue. Individual income is next at about 30 percent, with corporate income taxes at less than 12.5 percent.

The Institute on Taxation and Economic Policy lists Mississippi’s taxes as 21st for “most unfair” or regressive, with people’s incomes less equal after state and local taxation. This is largely because of the state’s reliance on sales taxes and it being one of only two states that levies its full sales tax on groceries with no exemptions, credits or reductions.

Sarah Miller, senior policy analyst for the Hope Policy Institute in Mississippi, said she’s waiting to see what the new tax committee proposes. But she said the talk of shifting further to user fees from income taxation is concerning.

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 “Any time you’re talking about moving away from an income-tax structure based on someone’s ability to pay, it’s really a tax shift onto low-income working families, who are already encumbered by the system,” Miller said.

Reeves said dozens of corporate tax cuts passed by the Republican leadership and majority over the past five years have already produced dividends. He said corporate income taxes over four years grew from $440 million to $590 million.

Reeves said that despite the tax cuts, state revenue and agency spending overall from fiscal 2012 to fiscal 2016 grew. Most large agencies’ spending for that period was up in double digits, including Medicaid spending increasing by more than 60 percent, Public Safety more than 30 percent, Human Services by almost 40 percent and MDOT by nearly 45 percent.

Reeves criticized agency leaders and media for reports of drastic cuts in services from budget cuts for fiscal ’16 and ’17 and said long-term tax and budget policy shouldn’t be based on a one-year stall in revenue growth.

“A lot of agency heads have gone to the media, and they’ve written stories, without checking numbers, about them being ‘cut to the bone,’” Reeves said. “We’ve reduced taxes 40 to 50 times, but grown the size of the economy. We have significantly more revenue coming into the state than we did five years ago.”

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Gunn and Reeves said the new budget committees will look closely at agencies’ spending, focusing on things such as raises for upper-level employees, in-state and out-of-state travel, number of employees per population served by the agencies, number of state vehicles, contractual costs and the number of “retirees” who have left agencies but come back as contract workers.

Gunn and Reeves said they hope the committees recommend reforms the Legislature can pass in the next session that starts in January 2017, but they can take more time if needed to “get it right.”

The new joint House-Senate tax and budget committees are bipartisan, but majority Republican. Lawmakers there Monday for the first organizational meeting asked a few questions of Gunn and Reeves.

Rep. Trey Lamar, R-Senatobia, asked whether the tax committee would consider taxing internet sales, which he called “a runaway train headed toward the state budget.”

The answer was, yes. Reeves said he’s heard figures as high as $300 million a year the state is losing in sales taxes from internet sales, although he’s uncertain of the veracity of that number.

Rep. Mark Formby, R-Picayune, and others asked whether local and county taxes and their relationship to state taxes would be considered in the reforms. Gunn said they would be.

Senate Appropriations Chairman Buck Clarke, R-Hollandale, said: “This is something we should be doing every year.” He noted the joint budget committee holds hearings with agencies each year and subcommittees are supposed to delve into agency budgets, but “we haven’t really been doing our job.”

Rep. Alyce Clarke, D-Jackson, is serving on the committee scrutinizing K-12 education spending.

“I think this could be helpful, this process,” Clarke said. “I hope all of us will be able to participate and have a voice. I think this is something that should have been done a long time ago.”

Rep. Becky Currie, R-Brookhaven, said: “It’s past time for us to look at things like Medicaid. I have said for years that MSCAN (managed care) has been the worst thing for Mississippi. Last year we had 20,000 less Medicaid recipients and we had $50 million overspending by Medicaid. Why?”

Gunn said the new committees will ask many such questions.

“What are we spending money on, and is that what we want to pay for?” Gunn said. “Should we privatize some of those functions? What efficiencies can we find? … What is it we want to see this agency accomplish? Where do we want to go, how do we get there and when will we know we have arrived?”

Contact Geoff Pender at 601-961-7266 or gpender@jackson.gannett.com. Follow @GeoffPender on Twitter.

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