Mississippi Sets Course to Eliminate Individual Income Tax by 2040, Advocates Celebrate Award

Jackson, MS – Mississippi is on a path to become one of the few U.S. states without an individual income tax, following the signing of the "Build-Up Mississippi Act" (House Bill 1) by Governor Tate Reeves on March 27, 2025. This landmark legislation aims to fully phase out the state's individual income tax, with the rate set to reduce to 3% by 2030 and further conditional cuts potentially leading to full elimination by 2040.

Douglas Carswell, CEO of the Mississippi Center for Public Policy (MCPP), recently celebrated this development, stating in a tweet, > "Income tax ELIMINATED! Honored / honored to accept SPN award yesterday on behalf of great Mississippi team." He tagged prominent anti-tax advocate Grover Norquist, signaling the national significance of the reform. The tweet likely refers to MCPP and Empower Mississippi being finalists for the State Policy Network's (SPN) "Biggest Home State Win" award for phasing out Mississippi's income tax, with the awards ceremony scheduled for late August 2025.

The new law builds on previous tax reforms, including a 2022 act that reduced the income tax to a flat 4%. House Bill 1 outlines a gradual reduction in the individual income tax rate, alongside a decrease in the sales tax on groceries from 7% to 5% effective July 1, 2025, and an increase in gasoline taxes. This move positions Mississippi as the first state since Alaska in 1980 to enact legislation for a complete income tax phase-out.

Proponents, including Governor Reeves and organizations like MCPP, argue that eliminating the income tax will stimulate economic growth, attract businesses, and allow residents to retain more of their earnings. Carswell has previously highlighted Mississippi's recent economic performance, attributing it to free-market reforms.

However, the legislation has drawn criticism. Opponents, such as the Center on Budget and Policy Priorities, warn that the tax cut disproportionately benefits high-income earners, with the wealthiest 5% of Mississippians projected to receive nearly 40% of the tax reduction. Concerns have also been raised about the potential impact on public services and increased inequality in one of the nation's poorest states. The full elimination of the tax is contingent on future revenue growth triggers, a mechanism that some observers note could be influenced by a "typo" in the bill's language, potentially accelerating the phase-out.