Tax Analysts Blog

Mississippi’s Very Good Idea to Help its Poor

Posted on Dec 10, 2014

Mississippi Gov. Phil Bryant (R) recently proposed a plan to create a 15 percent nonrefundable earned income tax credit for low-income working families. I have not always been a fan of the EITC, mainly because I find it odd to have the tax collector run what is essentially a welfare program.

But EITCs are generally good policy. They require the recipients to work. From an administrative and policy perspective, EITCs work well within the income tax system. One advantage of the income tax is that it can be easily designed to provide relief to low-income taxpayers. I recognize that it is difficult to provide relief for low-income taxpayers through other taxes such as sales or property, although I note that the income tax can be designed for mischief as well. But providing income tax relief to the poor and dispossessed is the right thing to do.

The Bryant proposal isn't perfect. A refundable credit would be better. As the folks at the Institute on Taxation and Economic Policy have noted, Bryant's plan would provide relief to about 9 percent of low-income taxpayers. But a refundable credit would reach 45 percent. Moreover, the credit would kick in only if state tax revenues increase by 3 percent annually and the state's emergency fund is fully funded.

Still, it is good that Mississippi is thinking about this issue. The state's tax system is decidedly regressive. As readers know, I am generally not an advocate of redistributionist policies. But we should try to minimize regressivity. The poor in Mississippi pay plenty of sales and excise taxes. Bryant's proposal is a good start to alleviate some of the regressive burdens placed on the state's citizens. Mississippi should join the 26 states now providing EITCs.

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