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Making Mississippi’s Income Tax More Equitable

January 11, 2012

Filed under: Budget & Tax,Income & Working Families,Income Tax — Tags: , , , , — admin @ 9:08 AM

Mississippi’s state income tax threshold, the amount at which persons start having to pay income taxes, has fallen below the federal poverty line since 2005 (See Figure 1, below).

Each year, the federal poverty line increases due to increases in the cost of living.  However, Mississippi’s income tax threshold does not adjust for inflation.

Without adjustment, the gap between the state’s income tax threshold and the federal poverty line will increase annually.  In turn, there will be more individuals living below the federal poverty line that will be required to pay state income taxes.

This blog is the first of a series of posts on the state’s tax system. Forthcoming posts will include policy solutions to address the growing regressive nature of the state’s income tax system.

Author: Francinia D. McKeithan, Policy Analyst/ SFAI Policy Fellow
Part 2: Making Mississippi’s Income Tax More Equitable—The Earned Income Tax Credit

Part 3: A State Earned Income Tax Credit – Estimated Cost, Eligibility, and Encouraging & Rewarding Work

JOB WATCH: U.S. EMPLOYMENT GROWS BY 200,000

January 6, 2012

Filed under: Jobs — Tags: , , , , — admin @ 11:45 AM

Today the national employment data reported that the U.S. added 200,000 jobs in the month of December. The rise in employment brought the nation’s unemployment rate to 8.5%, down from 8.7% in November.[1] While the job numbers show positive momentum in employment growth, Mississippi’s unemployment rate of 10.5% registered above the nation’s last month, and the state’s leaders continue to focus on the need for substantial job creation.

A LONG TERM VIEW OF EMPLOYMENT

The figure below shows changes in Mississippi’s employment over the last three decades. In the 1980s and 1990s Mississippi experienced substantial employment expansion. However the early and late 2000s have brought decreases in overall employment with the largest decline (3.5%) coming in 2005-2010. In November 2011, Mississippi still had 50,000 fewer jobs than before the 2007 recession began. Unemployment rates for each of Mississippi’s counties can be found here.

POLICIES FOR ADDITIONAL JOB CREATION

Senior Economist Timothy Bartik from the W.E. Upjohn Institute researches state economic development policies that promote growth in jobs and earnings. Bartik’s findings have revealed that when states provide additional resources for customized job training to businesses, it increases job growth and per capita earnings substantially more than a general business tax cut per dollar invested. Customized training can provide skills to a business’ new or existing employees.

Enhancing funding for targeted job training provides the dual benefit of building up businesses already in a community and recruiting businesses to a region. Communities can also put policies in place to promote using customized training funds to prepare and hire unemployed workers from the local community.

In Mississippi, initiatives like the Subsidized Employment and Training Program (STEPS) used public funds to subsidize wages for businesses that hire and provide skills to unemployed workers. The Mississippi Community College Board’s Office of Workforce Education oversees resources to colleges that provide workforce training to local employers.

Mississippi continues to need actions that stimulate job growth across local communities. As state and regional leaders make decisions about how to spur job creation, dedicating additional resources to customized training and pooling industry training needs may offer an avenue to help Mississippi’s businesses compete and ensure more jobless Mississippians move into employment opportunities.

Author: Sarah Welker, Policy Analyst

[1] The U.S. unemployment rate in November was revised from 8.9% to 8.7% in the December release.

A Year in Numbers: Important Facts From 2011

December 29, 2011

Filed under: Basic Economic Security,Budget & Tax — Tags: , , , , , — admin @ 8:51 AM


As 2011 comes to a close, we have an opportunity to step back and take a clearer view of Mississippi’s economic outlook for the future.

2011 By The Numbers
The table below provides six key numbers from 2011that underscore the importance of continued work in 2012 to advance the economic security of Mississippi’s working families.

Each of these data points underscores the reality that working families in Mississippi face numerous challenges to achieving economic security and prosperity. These barriers require attention.

Throughout 2011, weak job growth; stagnant wages and rising costs have meant that too many workers and their families face economic hardship.  Actions that stimulate job growth, provide additional access to quality education and support working families falling short of economic security remain vital in the year ahead.

Author: Sarah Welker, Policy Analyst
Sources
1 Bureau of Labor Statistics. Regional and State Employment and Unemployment.
2 Ibid.
3 Miller, Sara. Executive Budget Recommendation: State Moving Into Fifth Year of Cuts Only Approach. Mississippi Economic Policy Center. Policy Matters Blog. December 27, 2011.
4 Economic Policy Institute analysis of CPS data.
5 Basic Economic Security Tables for Mississippi.
6 Kids Count Data Center.

Executive Budget Recommendation: State Moving Into Fifth Year of Cuts Only Approach

December 27, 2011

Filed under: Budget & Tax,FY 2013 — Tags: , , , — admin @ 10:32 AM

The final Executive Budget Recommendation (EBR) from Governor Barbour who leaves office in a few weeks was released December 21st.

The table below shows the budget recommendation for state support funds in FY 2013 compared with FY 2012.

FY 2013 Executive Budget Recommendation  for State Support Funds Compared with FY 2012

Total state support funds under the recommendation are $6 Million below FY 2012 appropriations.  The expiration of federal recovery act dollars and the absence of new revenues contributed to the need to cut budgets.

On education line items, the Governor’s budget includes a recommendation for over $40 Million in cuts to MAEP—the statutory K-12 school funding formula.  Higher education, including Universities and Community Colleges, is recommended for cuts of over $25Million.

The Department of Mental Health is recommended for cuts totaling only $3.5 Million.  However, the Governor suggests these cuts be made by closing four mental health facilities and six crisis centers.  The Governor recommends $7 Million in additional funding to transition services to community based programs.

Larger percentage cuts are recommended for Conservation Programs, Agricultural Programs, and the Mississippi Arts Commission.  Most other categories are recommended for cuts between 1.5-3%.  Those cuts do not seem as dramatic as the others, but they are recommended for programs that have endured year-after-year of budget cuts.

Despite the cuts approach, the EBR does make several notable recommendations to support at risk and working families.  Specifically, recommendations to fully fund the Olivia Y settlement – a lawsuit that was settled due to problems identified within the child welfare system – and to increase student financial aid by $2.6 million are strong recommendations that should be followed in the next administration.  Additionally, the common sense recommendation to increase the number of auditors at the Department of Revenue, if followed, will bring in more revenue by enhancing collection efforts.

At the end of the day, however, the state is moving into its fifth year of cuts.  The cuts are coming as federal resources for recovery and reinvestment begin to go away.  Furthermore, deficit reduction talks at the federal level suggest a long term erosion of federal support for state programs – a move that leaves Mississippi particularly exposed given its reliance on federal funding.  To preserve the quality of and access to state services that are vital to moving the state forward a balanced approach, instead of a cuts only approach is needed.

Look for further analysis of both the legislative and executive budget recommendations in the coming weeks as we prepare for the legislative session.

Author: Sara Miller, Senior Policy Analyst


 

Fiscal Year 2013 Budget Recommendations: Cuts Continue

December 21, 2011

Filed under: Budget & Tax,FY 2013 — Tags: , , , , , , , , , , , , — admin @ 11:23 AM

On December 13, the Joint Legislative Budget Committee (JLBC) submitted its Fiscal Year 2013 Budget Recommendation for consideration by the Legislature.

The Fiscal Year 2013 budget recommendation includes General Funds ($4,567,434,000); State Support Special Funds ($819, 341, 841); and Other State Support Funds ($12,689,048,251); for a combined total of $18,075,824,092.

The JLBC recommended level funding for MAEP, Community Colleges, and Mental Health. However, there were large cuts recommended for many other state agencies and their supported programs, including:

  • Public Health, with a 19.6% reduction in agency budget;
  • Agriculture and Commerce with a recommended 19.1% budget reduction;
  • Cuts to Conservation incorporated a 46.2% reduction for Wildlife, Fisheries, and Parks;
  • Military, Police, and Veterans Affairs included a 37.6% cutback to MEMA Disaster Relief along with significant cuts to Public Safety (including the Highway Safety Patrol  at -19.2% and Law Enforcement Officers’ Training Academy at -48%); and
  • Fiscal Affairs (with Dept. of Audit down 27.8% and Finance and Administration down 28.9%).

Table 1 provides a brief snapshot of how the cuts played out for our state’s general fund agencies.

*A copy of the original document can be found here.

Other highlights from the FY 2013 Budget Recommendation:

  • Total decrease in state support of -2.3% (127.4 million less than was appropriated for FY 12);
  • Total funds decrease of -7.5%; and
  • General funds amount ($4,567,434,000) marks a 1.4% increase from the 2012 level.  However, this is still over $430,000,000 less than FY 2008 general funds.

Mississippi can make better choices.  It is essential that our state consider options for building and maintaining the programs that are vital to the people of our state.

A balanced approach that includes raising revenue, instead of a cuts only approach, is the pathway to building the public structures needed to move Mississippians along a pathway to prosperity.

Author: Francinia D. McKeithan, Policy Analyst/ SFAI Policy Fellow

Mississippi State and Local Government Revenue FY 2009

December 12, 2011

Filed under: Uncategorized — Tags: , , , , — admin @ 9:00 AM


This past October, the US Census Bureau released state specific data on state and local government finances.  The report included data on revenue collections from sources such as income taxes, property taxes, and general sales and was used to calculate the two measures most commonly used to compare state and local tax revenue levels—revenue as a percent of personal income and revenue per capita.

Why Do These Revenue Calculations Matter?

Interestingly, Mississippi was in the middle of the pack among state and local tax revenue as a percentage of total personal income, but was near the end of the ranks when considering state and local tax revenue per capita.  Revenue as a percent of personal income and revenue per capita are just two ways of viewing state revenue.  However, the difference between the two measures highlights the regressive nature of Mississippi’s overall tax system.

You can read more about our state’s rankings in MEPC’s fact sheet Mississippi’s State and Local Government Revenue FY 2009.

Author: Francinia D. McKeithan, Policy Analyst/ SFAI Policy Fellow

 

Federal Budget Decisions to Have Major Impact on Mississippi

December 9, 2011

Filed under: Budget & Tax — admin @ 10:35 AM

An opinion piece by Charlie Mitchell in the Sun Herald that ran Tuesday, December 6th highlights the effect that federal budget decisions have on our state.  Mississippi receives a great deal of federal funds to support state services.

Federal stimulus funds were integral to keeping the state a float during the recession, but their effect didn’t begin and doesn’t end there.  As shown in the figure below, for FY 2012 federal funds made up almost half of all state appropriations.

FY 2012 State Appropriations by Source

Total=$18.95 Billion

This was also true for pre-recession appropriations.  In FY 2008, federal funds also made up 48% of total state appropriations.

As spending debates continue in Washington, it is critically important to understand that many of our state services here in Mississippi are inextricably connected with what happens to the federal budget.  Similar to our calls for a balanced approach that includes raising revenue instead of a cuts only approach here at home – the same formula is even more important at the federal level for maintaining jobs and the quality of services that we expect.

Author: Sara Miller, Senior Policy Analyst
Source: FY 2012 Appropriated Budget

 

Mississippi’s Current Corporate Tax Laws are Costing The State Much Needed Revenue

December 7, 2011

Filed under: Corporate Tax Laws — Tags: , , , , , — admin @ 9:23 AM


A new study from the Institute on Taxation and Economic Policy (ITEP) and Citizens for Tax Justice (CTJ) compiles profit and state tax data from 265 major corporations operating in the United States.  The report also suggests methods that states can use to improve their corporate tax laws.

The report finds a total of 68 of the 265 companies (all of which earned a profit) paid no state corporate income tax in at least one of the last three years.  It also found that state corporate income taxes have declined significantly as a percent of the whole economy.

  • In the last three years, state corporate income taxes were at their lowest level as a percent of the economy since World War II.

In a blog post earlier this year, MEPC reported on some state specific data from the PEER committee about the portion of corporations operating in the state paying zero state income taxes.

  • The research showed that approximately 80% of all corporations operating in Mississippi do not pay state corporate income tax.

The PEER data also shows that 70% of the largest corporations (as measured by payroll withholding) do not pay corporate income taxes.

The ITEP report suggests multiple ways that states can improve their corporate tax laws to halt the decline in this vital revenue source and make sure corporations are not able to “shift” income out of state to avoid taxation.  Three of those ways are highlighted below.

  • Combined reporting which would require a parent corporation and its subsidiaries to file their income as a whole, limiting its ability to shift income out of state to avoid taxation.
  • Decoupling state tax laws from federal tax loopholes which reduce the amount of taxable income corporations have to claim in their state tax filings.
  • Increasing accountability and transparency for tax incentives.  Many tax incentives are enacted into law indefinitely but data is not available to lawmakers or the public on the effectiveness of these programs.
Author: Sara Miller, Senior Policy Analyst

JOB WATCH: Mississippi Unemployment Rate Above 10 Percent

December 5, 2011

Filed under: Jobs — admin @ 12:52 PM

The national jobs report released Friday showed substantial gains in overall employment with the U.S. adding 120,000 jobs. For the first time in over 2 years, the country’s unemployment rate fell to 8.6%. The report also found that job growth in October and September was stronger than initially reported.

While November reports for states have not been released, information on unemployment for October is available. In October, Mississippi’s unemployment rate remained unchanged at 10.6 percent for the second month in a row.

Almost four years after the start of the 2007 recession, Mississippi is one of ten states that continue to experience unemployment rates above 10 percent.  Only California and Nevada were reported to have higher unemployment rates in October. The graphic below shows unemployment rates for states bordering Mississippi. Louisiana and Arkansas’ rates were below the national rate of unemployment.

While the uptick in national employment and consumer sentiment are positive developments, Mississippi’s workforce still faces a long recovery to reach pre-recession levels. In total, an estimated 138,700 adults in Mississippi were jobless and looking for work in October 2011, about 10,000 more than were jobless one year ago. The depth and persistence of this recession reaches beyond previous downturns. Without a substantial change in job growth trends, it will be several years before the state’s unemployment rate returns to normal levels.

As national and state employment levels recover slowly, steps can be taken to put more of Mississippi’s working families on a path to income gains and financial security. MEPC continues to recommend building workforce training through sector initiatives and strengthening work supports like child care, health care, energy assistance and affordable housing.  Only by taking a balanced approach that includes raising revenue will Mississippi have the resources to put the education and work support systems in place needed to be competitive in the global economy.

Author: Sarah Welker, Policy Analyst

Cyber Monday Not a Good Deal for State Revenue

November 28, 2011

Filed under: Uncategorized — Tags: , — admin @ 9:00 AM

Today is Cyber Monday, a day in which online retailers offer discounts to holiday shoppers.  It began as online retailers observed significant increases in sales on the Monday after Thanksgiving.  According to comScore, last year’s cyber Monday sales reached over $1 billion dollars and were up 16% over the previous year.

Cyber Monday also holds significance for the state budget.  Why?

While some internet retailers remit sales tax to the state of Mississippi, they are not required to collect sales taxes. Federal tax law does not require an out of state retailer (whether online or mail-order) to collect sales tax unless it has a physical presence in the state.  If Mississippians make purchases online and the retailer does not collect the sales tax, the state loses revenue that could have been used for the education of children, to keep college affordable or to create healthy families.

Does that mean that taxes are not owed on the items purchased?  No.

If sales taxes are not collected on any item purchased via the internet or mail order, the consumer owes a use tax on that item equal to what the sales tax would have been if it were purchased at a “brick and mortar” store.  Use taxes may be paid by filing with the Mississippi Department of Revenue.

Rising internet sales are a potential threat to the adequacy of Mississippi’s system of collecting revenue – a system that relies heavily on the sales tax.  This growing imbalance also creates a playing field that is not level among local small businesses and out of state retailers.  If out of state retailers can offer products similar to products sold by local businesses for lower prices because of the absence of a requirement to collect a use tax, then local businesses could be affected by the drop in demand for their goods.

Many states are looking at ways to take action to require online vendors to collect sales tax.

More information on internet sales and the sales tax will be available in MEPC’s upcoming report on threats to state revenue.

Author Sara Miller, Senior Policy Ananlyst

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