Senate passes $538 million tax-cut package, lowers grocery and income taxes, raises gas tax

The Mississippi Senate on a final roll call approved a tax package that cuts the state grocery tax from 7% to 5% effective July 1, 2025, phases the top individual income tax rate down from the scheduled 4% to 2.99% over several years, and raises the gasoline excise tax by 3¢ per year for three years, the bill’s sponsor said.

Senator Harkins, who presented the measure as the chamber debated Senate Bill 3095, said the combination of reductions and offsets produces a $127 million immediate reduction from the grocery-tax cut and a total of about $538 million in tax cuts when measured against the previous structure. “We take the income tax from 4 to 2.99. We lower the grocery tax immediately from 7 to 5. And we raise 3¢ a year for the first 3 years on the gas tax for a continued source of funding for maintenance for MDOT and state aid road,” Harkins said during his explanation to colleagues.

Why it matters: the package’s revenue shifts fund transportation needs while returning money to taxpayers. The bill directs the portion of excise revenue above 18¢ per gallon to be apportioned with 23.25% to the Office of State Aid Road Construction, 2.75% to the Strategic Multimodal Investment Fund and 74% to the Mississippi Department of Transportation (MDOT). The sponsor said the gas-tax increases are intended to produce about $212 million a year in recurring revenue after the three-year phase-in for highway maintenance and related functions.

Key provisions and timeline: Section 2 reduces the grocery tax from 7% to 5% on July 1, 2025; the personal income tax rate for individuals over $10,000 will be reduced in steps: to 3.75% in 2027, to 3.5% in 2028, to 3.25% in 2029 and to 2.99% in the final year shown in the bill’s schedule. The gasoline excise tax increases from 18¢ to 21¢ on July 1, 2025; to 24¢ on July 1, 2026; and to 27¢ on July 1, 2027. The bill also provides indexing of the excise rate every two years after 2029 with a cap of 1¢ per indexing period.

Local governments and formula changes: The bill adjusts how sales and grocery tax diversions are calculated so municipalities and certain funds are held harmless despite the grocery-tax reduction. It also increases county minimum guarantees under the state-aid road distribution formula—raising an existing $4 million minimum to $5 million for a transitional period and to $6.5 million in the subsequent year range, the sponsor said. Harkins said counties would begin receiving and could use the increased funds immediately.

Debate and failed amendments: Lawmakers sparred over the package’s structure and long-term fiscal effects. Senator Simmons offered a strike-all amendment to eliminate the grocery tax entirely (cutting it to 0%), saying that would bring Mississippi in line with the roughly 33 states and D.C. that do not tax groceries. That amendment was defeated on a roll call, 16–33. “This amendment will allow the state of Mississippi to join those other 33 states and the District of Columbia,” Simmons said while presenting the strike-all.

Senator Blunt offered an amendment tying the bill’s effective date to a public pension milestone, making the legislation effective only when the Public Employees’ Retirement System (PERS) is funded to 80%. Blunt argued lawmakers should ensure PERS funding before enacting large tax cuts: “We’re gonna cut taxes after we ensure the financial stability of the retirement system,” he said. The amendment failed on a voice vote; the chair announced “Noes have it.”

Senator Bridal proposed a competing amendment that would have cut the grocery tax to 3.5% and directed a larger recurring appropriation to transportation without raising the gas tax. Bridal argued the amendment would send more funding to highways while avoiding a pump increase; the chair announced the amendment failed on a voice vote.

Supporters and opponents: Proponents, including Harkins, described the measure as balancing immediate tax relief at the grocery store and longer-term, user-based funding for roads. Opponents warned the package drains the general fund and could worsen the state’s ability to meet obligations such as the PERS unfunded liability; several senators urged more direct investment in infrastructure and long-term fiscal planning. Senator O’Brien questioned assumptions about economic growth and migration tied to income-tax reductions, calling the argument that people would flock to the state “obviously wrong.”

Final action: On the afternoon roll call the Senate passed the bill by a vote of 34–15. Earlier procedural steps included adoption of a committee substitute and the rejection of the major amendments described above. The bill’s sponsor said the package results in a net tax cut in each of the bill’s first five years and characterized it as the largest tax-cut package in the state’s history in dollar terms.

What remains: The measure changes multiple distribution formulas and creates new indexing for fuel excise revenue; detailed handouts and project schedules were distributed to senators during floor debate, the sponsor said. The transcript does not specify the next steps in the process (transmission to the other chamber or conference), nor does it include implementation or enactment dates beyond the effective dates within the bill text.