Where state taxes come from

Published 4:07 pm Wednesday, January 25, 2012

As the Legislature seeks to formulate public policy and craft a state budget at a time when the state will lose $126 million in federal stimulus funds, unemployment rates and demand on public health care is high, and most state agencies are seeking increases, it might be instructive to pause and look at the source of the state’s total $6.74 billion in tax revenues collected in the fiscal year that ended June 30, 2011.

The short answer is that the source of state government revenues is, as it has always been, the beleaguered taxpayer. But a more specific look at the sources of state revenue helps understand who pays and how the state collects from the taxpayers.

Of that $6.74 billion in gross state revenues collected, $2.2 billion is diverted from the state general fund to county and municipal governments and to special funds, leaving $4.5 billion in the state’s general fund. Of that total, 41 percent or $1.79 billion comes from sales taxes, 31 percent or $1.38 billion comes from individual income taxes, and 10 percent or $448 million comes from corporate income taxes.

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Use taxes generated a total of $264 million, with $54 million diverted to public school districts and counties. While a lot of heat is generated over so-called “sin” taxes on things like gambling, smoking and drinking, more taxes are generated from taxes on insurance premiums than the state’s portion of the tax revenue from all the casinos combined.

Gaming in the last fiscal year generated $277.8 million in taxes in the form of $130.9 million to county and municipal governments and the state’s portion of $146.9 million. Overall, gaming provided 3 percent of general fund revenues.

Tobacco taxes generated $158 million or 4 percent of the General Fund. Alcoholic beverage taxes generated $71 million, but $8.6 million went to county and municipal government, leaving $63 million or 1 percent of general fund revenues for the state.

Some $419 million in petroleum taxes are diverted to special funds, primarily to the Mississippi Department of Transportation. All other taxes produce $145 million or 3 percent of general fund revenues.

Mississippians rank 33rd in state taxes paid, according to U.S. Census data. Interestingly, despite the belief that Mississippi’s revenue won’t return to Fiscal Year 2007 levels until FY 2015 or FY 2016, the state’s general sales tax collections increased 1.8 percent from the third quarter of 2010 to the third quarter of 2011. Over the same period, individual income tax collections were up 5.3 percent and corporate income tax collections were up 3.6 percent. Oil and gas severance taxes were up a robust 25.5 percent in the state over that same period.

That’s the good news. The bad news is that those increases substantially trailed the national average increase in each category for the same period.

Most troubling for state lawmakers is the fact that other than the possible exception of congressional action that would enable states to pursue collecting existing sales taxes from online sales, there is no sentiment for new revenues in the new Republican-controlled Legislature. What is most encouraging is that existing sales taxes are trending ever-so-slightly toward higher collections.

(Sid Salter is a syndicated columnist. Contact him at 601-507-8004 or sidsalter@sidsalter.com)