JACKSON, Miss. (AP) – Mississippi’s Republican Governor Tate Reeves said Wednesday he will continue to urge lawmakers to phase out the state income tax, even with the possibility of federal budget cuts that could hit states after Donald Trump begins his second term . president.
Mississippi is one of the poorest states in the US and receives billions of dollars annually from the federal government. One of the largest chunks of federal money goes to 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 it should — they should give states more flexibility about which parts of the population are covered and which are not,” Reeves said of Medicaid.
Reeves, who spoke at a news conference Wednesday, has supported Trump since the 2016 election. Trump said Tuesday he had chosen Elon Musk and former Republican presidential candidate Vivek Ramaswamy to lead an effort that will reduce spending and the size of the federal government could be significantly reduced.
About 42% of money for state government services in Mississippi came from the federal government during the budget year that started July 1, according to the nonpartisan Legislative Budget Office. That’s about $13.2 billion out of nearly $31.7 billion. About $6.5 billion of the federal money was for Medicaid.
Individual income taxes are expected to generate about $2.1 billion for the state this year, while an expected $2.9 billion will come from sales taxes, the budget office said.
Mississippi is already cutting personal income taxes 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 do not impose it. 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 Governor Sarah Huckabee Sanders of Arkansas signed legislation that will lower her state’s income tax to 3.9%. Louisiana lawmakers are in a special session this week to consider cuts to the state’s income tax, possibly up to 3%.
“We’re in a competition for new businesses and new industries, and it’s a competition that we have 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 have to be competitive from a fiscal perspective.”
Reeves on Wednesday announced $110 million for infrastructure upgrades at potential industrial sites and projects for worker training, tourism and conservation. The money came from the state government and other sources, including the Appalachian Regional Commission, the Delta Regional Authority and a federal fund established after the 2010 Gulf of Mexico oil spill.
Mississippi must be ready to compete with other states as industries look for places to develop, the governor said.
“Most of the challenges we have in Mississippi can be solved if everyone here has the skills they need and the opportunity for a job that pays $60, $70, $80,000 a year, and that’s what we’re focused on . Reeves said.
