House and Senate leaders on Monday evening unveiled new plans to eliminate the state income tax and raise gasoline taxes — charting a path to more negotiations over the most notable legislative debate of the 2025 session.  Monday marks the first time the Senate leadership has proposed a plan to eliminate the income tax, a significant move from its previous position wanting only to cut the tax that accounts for nearly one-third of the state budget. Republican House Ways and Means Chairman Trey Lamar said the move could bring the chambers closer to reaching a final agreement.  “I can’t underestimate the importance of the Senate placing into written form and out in the open public that they are agreeing to eliminate the income tax,” Lamar said. “We’re willing to work with them. We are not willing to compromise on total elimination of the income tax and taking care of some the infrastructure needs we have.” The House also changed its position Monday on a few key provisions. It agreed to increase the state’s net sales tax from 7% to 8%, down from the eventual 8.5% target the chamber had originally proposed. The revenue from this tax increase would provide $48 million annually to pay for infrastructure improvements via the State Aid Road Fund. The remaining funds would go into the state’s general fund. It also changed what had been a new 5% sales tax on gasoline to a 15-cents-a-gallon excise tax increase, phased in at 5 cents a year over a three-year period. That would bring in approximately $23 million a year once fully phased in, Lamar said. This would be added to the current 18.4-cents-a-gallong excise Mississippi motorists currently pay. The House plan would also cut the sales tax on groceries from 7% to 5%. The new House plan would also create a new fund that gives those over the age of 65 property tax credits of $200 a year. This provision is designed to allay the concerns of senior citizens, who stood to benefit little from income tax elimination because Mississippi exempts retirement and Social Security income from state income taxes.  However, the most surprising development was in the GOP-majority Senate, which finally answered calls from House leadership and Republican Gov. Tate Reeves to propose a plan that eliminates the income tax.  READ MORE: Mississippi lawmakers struggle to reach tax agreement as federal cuts loom Senators proposed phasing out the tax over an undefined period, but it would most likely take longer than the House has proposed. The House held to its position that the income tax must be eliminated by 2037. Republican Lt. Gov. Delbert Hosemann called the Senate plan fiscally responsible, while House leaders said a quicker timeline is needed for abolishing the tax to ensure that economic growth for the state.  Mississippi state senators review a bill during a Senate Finance Committee meeting at the Mississippi Capitol in Jackson, Miss., on Monday, March 17, 2025. Lawmakers are debating a proposal to eliminate the state income tax, a key issue in the legislative session. Credit: Eric Shelton/Mississippi Today The Senate plan would decrease the 4% income tax rate — already among the lowest in the nation — by .25% each year from 2027 to 2030 and leave it at 3% in 2030. Afterward, the income tax would be reduced with “growth triggers” or at a proportional rate depending on the difference between the state’s revenue and spending plans that year.  READ MORE: How soon we forget: Mississippi House push for record tax cuts revives fear of repeat budget crises “We’re going to basically let our economy dictate the rate and how progressive we are in reducing the income tax on citizens in our state while protecting the core functions of government that we’re supposed to provide,” Senate Finance Chairman Josh Harkins said.  Lamar said the Senate’s language on triggers, which he had not seen as of Monday afternoon, would be crucial to reaching a final agreement. “The last thing we want to do is mislead the Mississippi citizens to have them believe they’re going to get their income tax eliminated and not (have it) actually work,” Lamar said. “So that trigger language will be key.” The Senate plan also immediately reduces the sales tax on groceries from 7% to 5%, increases the gasoline tax by 9 cents over three years to fund infrastructure projects and overhauls the state public employee retirement system.  Many Democrats are expected to oppose either plan. Democratic Sen. Hob Bryan of Amory said the new Senate plan marks a “sad day” in the state’s history because it forsakes the government’s responsibility to provide key services in one of the poorest states in the nation. READ MORE: Legislature stumbles into final weeks of session in a tax-fight funk: Legislative recap Bryan and others have warned that cutting revenue and upending the state’s tax structure in uncertain economic times — with potential massive cuts in federal money Mississippi relies on — is foolhardy. “I know the snake oil salesman who showed up in Mississippi selling this bill of goods must be happy,” Bryan said.  Despite the new offers from each side, the two chambers are still far apart in their negotiations and the Republican leadership of each has continued criticizing the other as the 2025 legislative session is scheduled to end in roughly two weeks. Sen. Hob Bryan discusses House Bill No. 1 during the Senate Finance Committee meeting at the Mississippi Capitol in Jackson, Miss., on Monday, March 17, 2025. The committee is debating the proposed legislation, which aims to eliminate the state income tax. Credit: Eric Shelton/Mississippi Today Lawmakers will likely conduct negotiations on a final tax cut proposal in a conference committee. The deadline for them to reach a final agreement is March 29. If they don’t meet that deadline, they could try to suspend their rules.  If the two chambers can’t reach an agreement, the governor could call them into a special session and try to pressure the two chambers to find a way to abolish what he and others call the “tax on work.”  The post Senate, House propose new income tax elimination plans, set stage for late-session showdown appeared first on Mississippi Today. ...read more read less