Mississippi House passes Build Up Mississippi Act, advancing 10-year income tax phase-out and sales-tax changes

The Mississippi House on the floor approved House Bill 1, the Build Up Mississippi Act, advancing a plan to phase out the state income tax over 10 years while reducing the grocery sales tax and changing how several existing revenue streams are diverted. The bill passed on a final vote of 88-24.

The bill’s sponsor, the Ways and Means chairman identified in debate as the representative from Tate, told members: “we are going to eliminate the tax on work for you, your children, your grandchildren, and all future generations.” He described the plan as a package intended to (1) make Mississippi’s tax code more competitive, (2) provide additional recurring support to cities and counties, and (3) provide roughly $400 million a year to the Department of Transportation for highways. The sponsor said the plan would be phased in over ten years and called it “the largest tax cut in the history of the state.”

Why it matters: The measure would change the state’s primary revenue mix by removing the individual income tax over a decade, cutting the state portion of the grocery sales tax, adding a 1.5 percentage-point local option sales tax for participating cities and counties, shifting some lottery proceeds to the Public Employees’ Retirement System (PERS) and setting up a budget stabilization fund to smooth timing differences.

Key provisions and figures discussed on the floor

- Income tax: The bill phases out the individual income tax over 10 years. The chair described the phase-out pace as roughly 0.31 percentage points per year and said the fully phased-in effect would be an approximately $1.0–$1.1 billion net annual reduction in state revenue (the sponsor and other members cited differing gross and net estimates during debate). At times opponents and questioners referenced a larger gross figure (about $2.2 billion) before offsetting changes.

- Grocery tax: The state portion of the grocery tax would be cut immediately in year 1 to about 4.5% of the state portion and would phase toward a 4% total grocery-tax rate at full implementation, according to the sponsor’s floor explanation. Cities/counties would be given a 1.5 percentage-point local option sales tax to “keep them whole” and, on average, to increase local diversion by about 15%.

- Local option and diversions: Cities and counties may opt into the new 1.5% local option sales tax; those that opt out would not receive the new local receipts and, under the bill text as explained on the floor, would not receive the new road/bridge funding tied to participation.

- Transportation and PERS: The bill would provide recurring funding to the Mississippi Department of Transportation (MDOT) — the sponsor cited roughly $350–$400 million annually — and would direct the first $100 million of lottery proceeds each year into the PERS retirement system until it reaches 80% funding, the sponsor said.

- Budget stabilization: The bill creates a budget stabilization fund to receive near-term collections while the phase-in timing takes effect; the sponsor said the fund would initially hold roughly $250 million from timing differences and could only be used under specified conditions.

Floor amendments and votes

- Amendments 1, 2 and 3: The floor adopted three cleanup or technical amendments described by the sponsor as non-substantive (each adopted by voice vote).

- Amendment 4 (Representative Scott, Jones): Representative Scott offered an amendment to move the grocery-tax reduction up from the bill’s multi-year phase-in so cuts would take effect immediately. Scott argued the immediate change would provide prompt relief to low-income residents. The sponsor said he would be willing to consider a faster timeline but members debated fiscal and implementation consequences. The House tabled Amendment 4 on a roll-call motion (machine vote) by a margin of 72 yays to 36 nays; a subsequent roll call on final passage recorded 88 yays and 24 nays and the bill passed.

Major concerns raised on the floor

Members asked about budget risk, specific program impacts and distributional effects. Questions and objections focused on whether the bill is revenue neutral; how the state would sustain education, higher education capital needs and other recurring obligations if revenues fall; impacts on bond ratings; and how low-income households would fare when some local sales taxes rise while income tax is eliminated.

Representative Johnson (Adams) and other members pressed the sponsor on whether the plan was revenue neutral; the sponsor repeatedly described the measure as a tax cut and gave the estimates summarized above. Others, including members from primarily rural districts and members raising concerns about historically underfunded institutions, pressed for assurances that education, universities and retirement obligations would not be harmed.

What happens next

With House passage, House Bill 1 proceeds to the Senate for consideration, where members said the measure could be amended further. The sponsor urged both parties to support the bill’s overall goals as the proposal moves to the next stage of the legislative process.

Ending note: The floor debate made clear the bill is a comprehensive tax-and-revenue rewrite with competing claims about long-term fiscal risk, immediate household relief through grocery-tax cuts, and new recurring funding streams for transportation and pensions. Final legal and budgetary effects will depend on Senate action, any conference changes and future appropriation decisions.