Mississippi governor intent on income tax cut even if states receive less federal money

JACKSON, Miss. (AP) — Mississippi Republican Gov. Tate Reeves said Wednesday that he will continue pushing lawmakers to phase out the state income tax, even with the possibility of federal spending cuts that could affect states after Donald Trump begins his second term as president.

Mississippi is one of the poorest states in the U.S., and it receives billions of dollars a year from the federal government. One of the biggest chunks of federal money is for Medicaid, a government health insurance program for low-income residents.

“To the extent that the federal government wants to reduce federal funding — and I think they should — they need to give states more flexibility on what segments of the population are covered and which ones are not,” Reeves said of Medicaid.

Reeves, who spoke during a news conference Wednesday, has supported Trump since the 2016 election. Trump said Tuesday that he had chosen Elon Musk and former Republican presidential candidate Vivek Ramaswamy to lead an effort that could significantly reduce spending and the size of the federal government.

About 42% of the money for state government services in Mississippi is coming from the federal government during the budget year that began July 1, according to the nonpartisan Legislative Budget Office. That is about $13.2 billion out of nearly $31.7 billion. About $6.5 billion of the federal money was for Medicaid.

The individual income tax is expected to generate about $2.1 billion for the state this year, behind an expected $2.9 billion from the sales tax, according to the budget office.

Mississippi is already in the process of reducing its personal income tax under a law Reeves signed in 2022. The state will lower its top rate to 4% in two years.

Reeves has long said Mississippi should eventually eliminate its income tax to compete with Florida, Tennessee and Texas, which don’t levy the tax. Republicans control the Mississippi Legislature. House Speaker Jason White has said he supports phasing out the income tax, while Lt. Gov. Delbert Hosemann has said the Senate will propose reducing the 7% sales tax on groceries.

In July, Republican Gov. Sarah Huckabee Sanders of Arkansas signed legislation that will reduce her state’s income tax to 3.9%. Louisiana lawmakers are in special session this week to consider reductions to the state’s income tax, possibly to 3%.

“We are in a competition for new business and new industry, and it is a competition that we’ve got to be aware of,” Reeves said. “And if we want to continue to see the kind of economic development successes that we’ve had, we’ve got to be competitive from a tax standpoint.”