Mississippi Is Ditching Its Income Tax. Other States Should Follow.
The poorest state in the nation just passed bold tax reform that empowers workers, attracts investment, and simplifies the system. It’s a model worth copying.
After months of politicians fighting, Mississippi has joined a small club of nine other states in passing legislation eliminating the state income tax—an outcome that will benefit Mississippians and hopefully encourage other states to follow suit.
House Bill 1, also known as the "Build Up Mississippi Act," will phase out the Magnolia State's income tax. Introduced by Rep. John Thomas "Trey" Lamar (R–Senatobia), the bill was transferred to the state Senate in January and amended last month to make its offerings more affordable and thorough. The persuasions were strong enough to flip the state House's previous stance on nonpassage, allowing Gov. Tate Reeves to sign the bill into law on March 27.
"I believe in a simple idea," Gov. Reeves remarked upon signage, "that government should take less so that you can keep more." The new legislation will gradually lower Mississippi's state income tax, currently sitting at 4.4 percent, to 3 percent by 2030. Further annual cuts depend on "growth triggers" linked to state revenue. This strategy will economically empower citizens and make the state's government more responsible. Mississippi proved that ambitious reform can occur, and other states should take similar action.
States with low-income taxes enjoy greater economic prosperity. Just compare Texas, which has no personal income tax, and Oklahoma, which has a top rate of 4.75 percent. Last month, the Tax Foundation found that Texas' economy grew roughly 35 percent faster than Oklahoma's over the last two decades, with Texas' personal incomes and gross state product being notably higher too.
A 2008 longitudinal study that analyzed economic growth in the States from 1964 to 2004 found that states with higher income taxes stifled economic growth, entrepreneurialism, and access to capital. Since Mississippi announced its cuts, Oklahoma's governor wants in on the change.
Low income tax makes states a magnet for investment. As noted by the Mississippi Center for Public Policy (MCPP), since the state reduced its income tax to a flat 4 percent in 2022, the Mississippi Development Agency reported a whopping $25 billion in inward investment. Businesses often consider tax burdens when deciding where to establish operations and maximize gains, while workers are drawn to areas where they can retain more of their earnings. According to interstate migration data by the U.S. Census Bureau, Americans flocked to low-tax states like South Carolina and Idaho in 2024. That same year, states like Florida, Tennessee, and Nevada—all with no income taxes—saw some of the strongest economic activity in the country.
As Mississippi stagnated in population growth last year, politicians hope this new economic relief will mobilize residents and ease aching wallets. Less income taxes can stimulate local economies by increasing consumer spending. States with lower income taxes typically have lighter tax burdens, meaning more take-home pay can be saved or reinvested in neighborhoods through everyday commercial purchases.
As the poorest state in the union, every dollar earned and kept in Mississippi is critical for survival. With time, a sizable cash flow can reinvigorate the overall financial situation and raise income per capita.
However, critics of the new legislation aren't focused on its potential, instead pouncing on a typo in the text. This error would dissolve the income tax sooner than intended, but there would still need to be a preceding surplus for every cut.
This oversight is an asset. Mistakes allow for increased flexibility and democratic debate regarding how states should enact tax policies and craft more ideal, air-tight rules. Suggestions and corrections can be issued with future legislation, like Mississippi's Senate Bill 3095 to cut grocery and income taxes, and other states can use these instances to draw public awareness to pressing state issues. As MCPP CEO Douglas Carswell wrote, "The revenue trigger still prevents reckless cuts that would harm the state's fiscal health."
Mississippi's new law embraces healthy competition, fiscal responsibility, and generational transformation. As states with low-income taxes have the best economic outlook, minimizing or abolishing the income tax is a growing trend. Other states should learn from Mississippi and forge more economic freedom for their residents.
