Soaring tax revenue and billions in pandemic aid from the federal government have left many states with the unusual problem of having too much money.
Jackson child care owner Deloris Suel speaks of her concerns about the income tax elimination and how the reduction and eventual elimination of those funds might impact programs funded by the state at the Mississippi State Capitol in Jackson, Miss., Thursday, Jan. 27, 2022.
“We need to get money back in people’s pockets if we’re to make a full recovery from the high public health cost and economic cost of this pandemic,” said state Sen. Mona Das, the Democrat who proposed the measure. Legislative leaders in her party are cool to the idea of using temporary revenue to finance permanent cuts, but some have rallied behind a one-time sales tax holiday proposal.
The idea is appealing to retirees such as Karen Morgan, a lawyer who worked for the state legislature and lives in a Maryland suburb outside Washington, D.C. And most high-earners avoided layoffs during the pandemic and investors have done well — keeping income tax receipts high. Consumers have used that money to buy a lot of goods: home-office furniture, patio heaters, vehicles. That’s sent sales tax revenue, a key source of government income in most states, soaring.
In addition to the income tax proposal, the House bill would reduce the taxes people pay each year to renew license plates for their vehicles and cut the sales tax on groceries. But the sales tax on most other items would rise from 7% to 8.5%. Seeking more widespread benefits, taxes on groceries, which are in place in about a dozen states, are being targeted.
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