Mississippi's proposal to repeal the state’s individual income tax portends to surreptitiously renege on many of the state’s existing tax incentives agreements. One of Mississippi's more valuable economic development tools is the Advantage Jobs Program, providing a cash rebate to certain businesses that create high-paying new jobs in the state. The rebate is based on a percentage of employee payroll tax withholdings, and the number of new jobs required for eligibility varies based on whether the business is located in more- or less-developed areas of the state. The term of these incentive payments can extend to up to 10 years.

H.B. 1439 proposes to immediately exempt from the individual income tax the first $50,000 for single taxpayers and $100,000 for married couples. The entire individual income tax potentially could be eliminated in 10 years, although that is far from certain based on the complex phaseout formula used in the bill. This sudden increase in exempt wages could effectively eliminate future withholdings for many of the recently hired employees who originally qualified for Advantage Jobs. Because this rebate is calculated as a percentage of a company's individual income tax withholdings, income tax repeal could effectively nullify many Advantage Jobs incentives previously negotiated to lure businesses to the state. Unquestionably, this could fundamentally alter the original economic equation relied upon by many of these taxpayers during the site selection process. Continue reading >