Housekeeping note: We anticipate the team working through this coming weekend’s 11th-hour negotiations and into next week to finalize the Session. Adjournment is likely on or before April 5th. Our team will directly alert you ASAP of any specific developments to legislation of interest.
3.24.25
Historic: MS Income Tax Cut Phase-Out Approved and headed to Governor
Negotiations on timing details may be ahead … Conference weekend on horizon to finalize budget and wrap up Session
House and Senate leaders reached a deal phasing out Mississippi’s personal income tax, voting to send a sweeping and historic tax-cut bill to Gov. Tate Reeves. The tax-cut deal, the result of discussion several years of debate, appears to resolve the major debate, whether to do it; left in play are future talks over how fast to phase out that tax.
Another income tax cut bill was put into conference on Friday that would allow for further talks as soon as this week on how quickly the cuts would be phased in. Or it could be addressed in future legislative sessions. The pace of the phase-out after 2030 is important as leaders in both chambers have at times recognized the need for the state to wean itself off the $2 billion currently generated by the personal income tax, now at 4% on individual income over $10,000.
That said, the bill is considered as a major victory for the state’s conservative Republican leadership, with Gov. Tate Reeves praising lawmakers and signaling he will sign the historic legislation into law.
Tax Cut Background
The near decade long initiative to eliminate the state’s income tax, advocated by leaders who argue that eliminating the tax on wages and work will inspire economic growth, first got traction last legislative term when lawmakers agreed to eliminate the top 5.5% bracket.
This year, House Speaker Rep. Jason White and House Ways and Means Chair Rep. Trey Lamar launched a plan to phase out the tax altogether in 10 years, to increase sales taxes to make up for some of the loss of revenue to local communities, to shift lottery revenue toward shoring up the public employees retirement system, and to implement new gasoline tax for revenue toward road, bridge and transportation infrastructure. The Senate introduced a proposal and last week added their final touches to a plan. The Senate amendments to the bill adopted by the House and sent to the governor resulted in a bill that will:
- Phase down the state’s personal income tax rate to 3% by 2030 (Corporate income tax remains in place).
- Reduce sales taxes on groceries (non-prepared food) from 7% to 5%
- Increases fuel taxes at the gas pump from 18 cents a gallon to 27 cents a gallon, phased in 3-cents-a-year for three years in a row to provide more infrastructure funding
- 23.25% of the new excise tax will go to State Aid Road Construction
- 2.75% will go into the strategic Multi-Modal Investment fund
- 74% will go to MDOT for road construction and maintenance
- Implement for new state employee hires in 2026 a retirement package with defined contribution options that begins addressing unfunded liabilities
- The Key Phase Out Question: Leaders said future reductions in the income tax rate lower than 3% were designed to only kick in when growth allowed for it; however, that growth trigger in the current plan could see the remaining income tax rate drop very quickly instead of over time. So, the rate of that phase out could well still be slowed either in a deal reached this week or sometime before 2030.
Meanwhile, in other legislative developments:
Budget
Legislative leadership had quietly signaled that state agency budgets would likely be funded at current-year levels unless a tax deal was reached. The discussions over finalizing the timetable of the income tax phase out, it remains unclear whether leaders are inclined to address specific budget increase requests. Budget negotiators are preparing to roll up their sleeves this week to finalize the budget.
PBM Bill Awaiting House Action
More than 20 pro-business groups have signed a letter asking House leaders to send PBM legislation to a conference committee for further changes. The Senate revived provisions that could drive up employer costs for health insurance by inserting them into HB 1123 originally authored by House Speaker Jason White. The measure includes expanded transparency requirements, a ban on spread pricing, and restrictions on steering patients to affiliated pharmacies. While independent pharmacists support the bill, employers and insurers have raised concerns about potential cost increases being passed on to consumers. Russ Latino, founder of the Magnolia Tribune, recently penned an op-ed on this issue that we think you will find informative. You can read it here
Governor Signs Off on AI Task Force
Governor Tate Reeves has signed SB 2426 into law, officially launching a new Artificial Intelligence Regulation (AIR) Task Force. The bill, which had strong bipartisan support, sets up a seven-member group to study how Mississippi can use AI in smart, ethical ways and report back to the Legislature each year through 2027.
The task force will look at how AI could be used across education, health care, state government, business, and more, while keeping public trust front and center and staying true to Mississippi’s values. Lawmakers like Rep. Jill Ford and Sen. Bart Williams see this as a big opportunity to spark innovation, grow the economy, and help shift how people see Mississippi.
This new law follows a recent executive order from Gov. Reeves asking the state’s Department of Information Technology Services to take inventory of AI use in state agencies. While most other AI bills didn’t make it this session, this one caught traction, as interest in responsible AI continues to grow.
Tornado Recovery Continues Across Mississippi
As mentioned in last week’s report, recovery efforts continue in parts of Mississippi following the devastating tornadoes that struck several counties earlier this month. State and local officials have been on the ground assessing damage and assisting impacted communities, particularly in Southwest and North Mississippi.
Governor Tate Reeves visited several of the hardest-hit areas on Monday, meeting with first responders, local leaders, and residents. “We’ve seen incredible resilience from our communities, and the state will continue doing everything we can to support them through the cleanup and rebuilding process,” Reeves said during his visit.
Damage assessments are ongoing, and power has been restored in most areas. State agencies remain engaged in coordination with FEMA and other partners to address long-term recovery needs.
Next Major Deadline: Thur., Mar. 27 CONCUR OR NOT CONCUR in amendments from OTHER HOUSE general bills and constitutional amendments. The full deadline calendar can be found here
