Mississippi made history this week as the first U.S. state, aside from oil-rich Alaska, to pass legislation aimed at phasing out its income tax. This monumental achievement marked a significant victory in trying to make America’s poorest state more competitive.
Signed into law by Gov. Tate Reeves (R-MS), the new law eliminates the income tax over the next decade, starting with scheduled cuts and, after 2030, a series of budget-driven “triggers.”
Mississippi’s income tax rate will drop in 0.25% increments, from 4% to 3% by 2030. From then on, further reductions will hinge on the state’s budget surplus. Given that Mississippi has run a series of budget surpluses in recent years, the income tax could vanish entirely by the mid-2030s.
So, how did Mississippi become such a trendsetter? The elimination of the income tax almost didn’t happen.
The first serious legislative effort to eliminate income tax came in 2022 under then-Mississippi House Speaker Philip Gunn (R).
Gunn simplified the variable tax rates into a flat 4% on income above $10,000. He saw how if almost every Mississippi household had skin in the game by paying the same proportion of income tax, it would make it easier to push for full elimination.
