Mississippi: No Tax Swap in 2006

It's all over but the shouting in Mississippi, where the 2006 legislative session has come to an end without major tax reform. Twice this year, the legislature passed "tax swap" legislation that would have cut the sales tax on groceries and paid for it with a cigarette tax hike. Twice Gov. Haley Barbour vetoed these bills. And on both occasions, the legislature was unable to come up with the majority necessary to override Barbour's veto.

A lot of folks are mad at Barbour for doing this. The editorial board at the Jackson Clarion Ledger says:

These bills would have been a small step, but an important one for tax fairness, raising a tax on tobacco that is too low and lowering the sales tax on food, which is the highest in the nation....The governor has been successful in lobbying for his programs. When will he lobby for Mississippi tax relief?

A separate editorial from the same paper tells readers exactly which lawmakers to blame for the failure of this bill.

For better or for worse, the Mississippi tax reform debate this year was about the merits of one particular proposal-- the outcome was clearly gonna be passing this thing, or passing nothing at all. And Mississippi is not a state where terms like 'fairness' and 'adequacy' get bandied about all that much by people with any political power. So it's somewhat understandable that people wanted to see this bill go through. But now that the legislative session is over, maybe it's time to ask whether this was the best approach to achieving these laudable fairness and adequacy goals. Gov. Barbour's veto message explains, in pretty much the same terms I would use, why this wasn't the smartest tax reform idea on the planet:

[The tax swap] would replace a growing revenue source (sales tax on groceries) with a declining revenue source (cigarette tax)...Every year going forward the reduction in revenue - the loss to the state's programs - will be greater and greater. This is bad policy, especially now.

You can question whether possibly Barbour's cozy relationship to tobacco industry lobbyists is what really drove his veto decision. You can question whether maybe what's really going on here is that he won't accept a tax hike of any kind, even when it's a tax that many (wrongly) consider voluntary. But the substance of his veto message remains quite true: it's dumb to try to pay for ANYTHING using cigarette taxes, and it's especially dumb to try to pay for a cost that is going to grow (as food tax repeal would) with a funding source that won't grow. So whether he means it or not, Barbour is right.

The Clarion Ledger is absolutely right about the unfairness of Mississippi taxes. But now that the food tax swap has failed, everyone involved can stop thinking practically about what's on the table and start thinking more generally about what a good progressive tax reform plan should look like. It will be fun to see what 2007 has in store for Mississippians.