Published: August 20, 2008 11:39 am         

Group recommends 50-cent tobacco tax increase

Jackson — The leader of a tax study commission says the group is only “working around the edges” as it prepares to recommend changes in how Mississippi collects revenue.

“Our tax structure in Mississippi is basically pretty sound,” businessman Leland Speed said Tuesday during a break in the group’s public hearing at the state Agriculture Museum.

The commission spent several hours discussing a list of suggestions it released Friday. Speed said he hopes to release a final report by next week.

The commission has no power to change taxes. That’s up to the Legislature, which starts its regular session in January. Lawmakers could alter, accept or reject the commission’s ideas.

The commission voted Tuesday to recommend increasing the cigarette excise tax by 50 cents a pack. The current rate, 18 cents a pack, is one of the lowest in the nation. Health advocates want a $1-a-pack increase — a level they say will reduce cigarette use by cash-strapped young people.

The commission also voted to recommend that local governments be allowed to grant exemptions to the inventory tax. Some small businesses have complained the tax hurts them, but city and county officials say cutting the tax would put a hole in local governments’ budgets.

Commission members said the state should have a long-term goal of reducing or eliminating the franchise tax, but they’re not advocating an immediate change.

Republican Gov. Haley Barbour started his second term in January and said he wants to update Mississippi’s tax laws by the time he leaves office in early 2012. Several months ago, Barbour appointed the commission of about 30 business people, professors, attorneys and elected officials to compare Mississippi’s system to the way other states collect taxes.

Democratic Rep. Percy Watson of Hattiesburg is chairman of the tax-writing House Ways and Means Committee, which is also examining the state tax system. Watson serves on the governor’s group, and voted against several of the recommendations Tuesday.

“No one really wants to pay tax. Everybody wants an exemption. Everybody wants a credit. But we’ve got services that government has to provide, and everybody wants the services,” Watson said. “We have to say, ’Where is the money coming from?”’

Watson said he’ll give the commission’s ideas a fair hearing — but he also wants to consider ideas the group is not recommending, including a reduction in the 7 percent sales tax on groceries.

Speed said the first draft of suggestions includes more tax cuts than tax increases. He said the goal is to make a list that is “revenue neutral,” meaning the state would neither gain nor lose money if some taxes go up and others go down.

Karen Green, tax law professor at the University of Mississippi, serves on the commission. She said Mississippi is one of four states that exempts all retirement income from taxation.

Green said that with an aging population, the state should take a “very modest step” and give tax exemptions for only the first $25,000 of non-Social Security retirement income. That way, she said, more revenue would be available to pay for schools, health care and other services. The commission rejected her suggestion.

“You have a certain amount of expense. Everybody needs to share it,” Green said. “And that’s the real issue, is how do we equitably share the tax burden in this state?”