A proposal for more progressive tax reform in the South is drawing mixed reviews in Mississippi.
The report, to be presented today at a Capital Press Corps luncheon in Jackson, is authored by a new policy think tank called Center for a Better South based in South Carolina.
The report says that Mississippi and 10 other Southern states should re-examine and reform their taxation policies in a wide variety of areas for a more level system without losing revenues.
Some conservatives suspect the plan might be a subversive attempt to raise taxes.
“Basically looks like that they are wanting taxes increased in just about every category,” said Pete Smith, Gov. Haley Barbour’s spokesman. “Governor Barbour doesn’t believe that Mississippi can tax itself to prosperity.”
Former Gov. William F. Winter, who will present the report at the luncheon sponsored by the John C. Stennis Institute of Government at Mississippi State University, says the proposal is about equality.
“This is spotlighting more equitable tax structure in the South,” said Winter, a partner at the law firm Watkins Ludlam Winter & Stennis in Jackson. “Progressive taxation is one idea. What we have is based on revenue laws from a generation ago.”
The report, entitled Doing Better: Progressive Tax Reform for the American South, examines 11 crucial areas of taxation across 11 Southern states, from Virginia and Kentucky to Louisiana and Florida, and scores them according to whether or not they have the recommended tax policy in place.
The 11 ideas for reform include broadening the sales tax base, enacting an Earned Income Tax Credit, modernizing the income tax bracket, and raising the cigarette tax to the national average, which is currently 92 cents a pack.
Out of the 11 areas, Doing Better says that Mississippi is satisfactory in only three; modernizing the sales tax; eliminating corporate loopholes; and strengthening accountability. Even in those areas, the report says that the state could use some more work.
“The conclusion we drew is that [the tax system] is broken,” said Andy Brack, a newspaper columnist covering the South Carolina legislature and the president of the Center for a Better South. “Lawmakers need to have a non-partisan debate on how to reform the tax system. It’s not working for most people right now.”
“Mississippi benefits from a broader sales tax base than most other Southern states,” the report says in the introduction to the scorecard on Mississippi. “But its income tax is far from modern with its low top rate, narrow brackets and lack of a refundable earned income tax credit.”
Such a credit, the report estimates, would cost Mississippi an estimated $75 million, if set at 10 percent of the federal earned income tax credit. This loss to the state would be compensated by broadening the applicability of the sales tax to include a greater variety of businesses.
Winter says that the report highlights issues that are crucial if the South hopes to continue its economic growth trend.
“There have been huge social and economic changes over the last generation,” said Winter. “We need to take a look at the whole tax structure.”
State Treasurer Tate Reeves said that he would support the idea of a comprehensive performance review of how the state’s tax system operates. But he said that the focus in Mississippi needs to on encouraging private investment and creating more jobs, not increasing the burden on people who already pay taxes.
“We need more people working and more taxpayers, not a higher tax rate on the people,” said Reeves. “If we could work with our tax code to encourage the private sector to invest in our state, we would be better served. The private sector creates jobs, which means more people working, which means more people with paying jobs.”
The idea of emphasizing corporate loopholes, he said, can be a deceiving phrase, since companies are allowed to utilize whatever structures the tax system legally permits.
“If it is found that a company violated the law, we have an attorney general who would not be bashful about prosecuting,” said Reeves.
Others are more cautious.
“When you start talking about looking at tax code, sometimes that’s another way of saying, let’s raise taxes,” said Jim Herring, chairman of the Mississippi Republican Party, who noted that he has not read the report.
Herring said that as a general rule, he was not in favor of raising taxes, and that Brack’s description of the tax system as “broken” indicated a partisan view.
“We need to look at those kinds of statements very guardedly,” he said. “I do not believe that the tax system is broken.”
