The Gazebo Gazette

JACKSON (GG) — The Mississippi Senate has amended and passed House Bill 1 (HB1) to responsibly eliminate the income tax, reduce the grocery tax, invest in infrastructure, and stabilize the Public Employees’ Retirement System’s (PERS) $26.5 billion unfunded liability while not raising sales tax.  

The Senate’s amendment ensures a gradual and responsible phase-out of the income tax based on economic performance. Key provisions include: 

  • Lower Grocery Tax: Reduces the grocery tax from 7% to 5% effective July 1, 2025, saving  taxpayers an estimated $127.5 million annually. 
  • Income Tax Elimination: Gradually reduces the individual income tax from 4% to 3% by  2030, followed by annual reductions of 0.2%, 0.25%, or 0.3% based on economic triggers.
  • Infrastructure Investment: Provides an additional $212 million in infrastructure funding through a phased three-year gas tax increase of 3 cents per gallon annually, totaling a 9-cent  increase while keeping Mississippi below the Southeastern gas tax average.
  • Stabilize PERS: Introduces a new Tier 5 plan for all new state employees beginning March 1, 2026, to address the $26.5 billion unfunded liability and stabilize the system, preventing further growth in liabilities. All current enrollee’s will receive their promised benefits, including the  “13th check.” 
  • No sales tax increase: Removes the increase on sales tax in HB1. 

In a complementary bill, the Senate proposes adjusting the state’s rainy-day fund from 10% to 12% with a further increase to 13% in 2030, to strengthen Mississippi’s financial reserves. 

“Creating a path to responsibly eliminate the income tax while not raising sales tax and stabilizing the PERS system has been a priority for Senate leadership. We cannot discuss eliminating the state’s second-largest revenue source without addressing our $26.5 billion unfunded liability as recommended by the PERS board.” said Lieutenant Governor Delbert Hosemann. “Our top goal remains delivering tax relief for all Mississippians while making fiscally wise decisions.” 

The Senate’s new plan would be the largest tax cut in Mississippi history. The legislation returns to the Mississippi House of Representatives for concurrence or nonconcurrence.