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TAXPAYER PAY RAISE ACT OF 2015

Putting $400 million back into taxpayers’ pockets

INCOME TAX BRACKET

ELIMINATION

Who benefits? Everyone!

Over the past three years, two out of

every three state employees have

received a pay raise. Some of these

increases were granted by agency heads;

others were granted due to achieving

certain “benchmarks,” like certifications.

But it begs the question: Isn’t it time for

taxpayers to get a pay raise?

I unequivocally believe we should put

more money into the pockets of working

Mississippians of all income levels.

That’s why I am supporting a tax plan

that will provide tax relief to 100 percent

of people who pay income taxes in

Mississippi.

Over the next five years, I propose we

eliminate the three percent tax bracket

levied on individual income. Currently,

our graduated income tax scale consists

of three rates: Three percent on the first

$5,000 of taxable income; four percent

on the next $5,000 of taxable income;

and five percent on all income above

$10,000.

By eliminating the three percent bracket,

we will give taxpayers – more than 1

million Mississippians – a pay raise of at

least $150. This means families will

have more money to buy groceries, put

gas in their cars, or simply put back for a

rainy day. Workers who earn income –

not lawmakers in Jackson – ought to

decide how to spend these extra dollars.

That $150 represents the compensation

for 17.5 hours of work for an entry level

wage earner in our state, or about half a

week’s work. All told, this $130.8

million tax cut will put more money in

the pockets of all Mississippians, and it

will especially help lower earners who

have less disposable income.

SELF-EMPLOYMENT

DEDUCTION

Who benefits? Small businesses.

Small businesses are the lifeblood of

Mississippi’s economy. Small

businesses employ about half of the

state’s entire private sector workforce,

and about 97 percent of all firms in the

state are considered small businesses.

From coffee shops to retail, from food

service to logistics, small businesses

keep Mississippi’s economy moving.

In our state, most small businesses are

sole proprietors. In 2013, income

generated from these types of small

businesses increased by nine percent in

the third quarter, totaling $8.8 billion.

According to the Mississippi Department

of Employment Security, Mississippi’s

small businesses generated more than

$22.3 billion in annual wages in 2013.

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Small businesses in our state have been

hit hard by the burdensome regulations

of Obamacare. Like death by a thousand

cuts, the fines and fees in Obamacare are

forcing business owners to reduce

employee wages just to keep their doors

open, invest less in their company, or

sometimes both. While states cannot

unilaterally overturn the mandates of

Obamacare that are crippling our

economies, we can adopt pro-small

business tax policies.

That’s why I believe we should allow a

state self-employment tax deduction for

income tax purposes to coincide with

federal income tax law. Mississippi’s

more than 160,000 self-employed tax

filers deserve equal tax treatment with

corporations by deducting up to one-half

of their self-employment taxes paid (the

same as allowed on the federal tax return

for Medicare and Social Security tax

payments).

In Mississippi, most private sector

workers are employed by pass-through

businesses, such as sole proprietors who

pay taxes through the individual income

tax code, including the federally-

imposed self employment tax. This tax

can result in marginal tax rates in excess

of traditional corporate rates, according

to the Tax Foundation. Thus, we should

prioritize tax policies to ensure small

businesses cannot only keep their doors

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open, but also thrive and expand. This

pro-growth tax change will reduce taxes

on small businesses by $9 million when

this deduction is fully allowed after three

years.

FRANCHISE TAX

Who benefits? Businesses of all sizes &

Mississippi’s economic prospects

Mississippi is one of a handful of states

that penalizes investment, putting our

companies – and our state’s economic

development prospects – at a

competitive disadvantage. This penalty,

also known as the franchise tax, requires

that companies pay a tax of $2.50 per

$1,000 of capital (or property) used,

invested, or employed.

The more capital or property a business

has, the higher their tax. Unlike

corporate income taxes, which are only

levied against profitable companies, the

franchise tax hits companies even when

they report a loss. Business groups

across the state have called this

provision of Mississippi’s tax code “one

of the most economically damaging” for

operations.

In Fiscal Year 2013, Mississippi

businesses were penalized hundreds of

millions of dollars on their investments

in the state. About 71,000 taxpayers paid

$229 million in corporate franchise

taxes, and the number grew even higher

– in excess of $242 million – for the

most recently completed fiscal year.

Additionally, this investment penalty is

disproportionately harmful to

Mississippi-based businesses. More

than three-fourths of all franchise tax

receipts came from businesses with a

Mississippi address.

But our businesses aren’t the only ones

impaired by this tax. The mere existence

of this investment penalty keeps

Mississippi out of consideration for

many corporate relocations, and it’s one

of the reasons Mississippi has chosen to

incentivize companies through other

measures, such as grants and low-

interest loans.

While this year’s bill by Senate Finance

Chairman Joey Fillingane will be the

first serious effort to eliminate this tax,

the call to repeal the state’s investment

penalty isn’t new. In fact, I served on a

2008 tax study commission that

recommended repealing this tax, which

puts our businesses and economic

development efforts at a competitive

disadvantage.

While other states have implemented

major franchise tax reforms in recent

years, Mississippi remains behind the

pack. About a dozen states still levy this

type of investment penalty, and

Mississippi’s franchise tax rate is among

the highest in the nation.

Eliminating this investment penalty is

not only good for businesses but also

taxpayers. Major industry sectors like

public utilities pay a large amount in

franchise taxes, and these costs are

passed directly to ratepayers. By cutting

this tax, ratepayers should get much-

needed utility bill relief.

A Forbes columnist recently described

Mississippi’s investment penalty as

“terrible” and called for its repeal. I

agree. Let’s repeal this investment

penalty and help job creators hire new

workers, expand operations and move

Mississippi forward.