MS IADA on Social Media

Overview of The “Build Up Mississippi Act”

Thank you to Serena Flowers of https://www.consultantsjxn.com/ for the important summary.

Bill Summary

The “Build Up Mississippi Act” aims to address funding and taxation frameworks for local governments in Mississippi by instituting a 1.5% sales tax on gross proceeds from sales within municipalities and unincorporated areas effective July 1, 2026, while allowing local authorities to opt-out. The act specifically focuses on increasing local revenue, particularly from food sales not purchased with food stamps, with a new progressive tax rate structure reducing the tax on these items from 4.5% through subsequent decreases down to 2.5% by 2036.

Significant structural changes are made regarding the distribution of public funds. Provisions establish the Budget Stabilization Fund for fiscal stability and a Maintenance and Capacity Projects Fund to enhance local infrastructure, directing sales tax revenues to these initiatives.

In tandem with these changes, the bill proposes to phase out the state income tax on individuals incrementally, reducing the taxable amount steadily until 2037, by adjusting the current tax brackets to diminish rates until the income tax is eliminated entirely.

Crucially, the act imposes penalties for counties that opt-out of the sales tax; such counties will lose access to the State Aid Road Fund tied to the new tax revenues, emphasizing accountability and incentivizing participation to support local infrastructure projects. The funds generated are expected to empower municipalities and counties to better manage their financial needs for public services.

Revenue Summary

  1. Local Sales Tax:– Municipalities: Authorized to impose a 1.5% sales tax on activities taxed at 7% under state law, including retail sales of certain food products. Municipalities may opt out by a specific date. – Counties: Authorized to levy a similar 1.5% sales tax on activities outside municipal boundaries, also with an opt-out option. Counties that opt out may lose eligibility for certain state aid funds.
  2. Retail Sales Tax on Food:– Phased reduction on retail sales of food for human consumption not purchased with food stamps: – 4.5% from July 1, 2026, through June 30, 2027 – 4.3% for 2027-2028 – 4.1% for 2028-2029 – 3.9% for 2029-2030 – 3.7% for 2030-2031 – 3.5% for 2031-2032 – 3.3% for 2032-2033 – 3.1% for 2033-2034 – 2.9% for 2034-2035 – 2.7% for 2035-2036 – 2.5% from July 1, 2036, onward.
  3. Motor Fuel Tax: – 5% on gross income from retail sales of certain motor fuels not exempt under specified conditions.
  4. Income Tax Rates (Scheduled Reduction): – Income exceeding $10,000, following the schedule: – 4.7% for 2024 – 4.4% for 2025 – 4% for 2026 – 3% for 2027 – 2.7% for 2028 – 2.4% for 2029 – 2.1% for 2030 – 1.8% for 2031 – 1.5% for 2032 – 1.2% for 2033 – 0.9% for 2034 – 0.6% for 2035 – 0.3% for 2036 – 0% from 2037 onward.
  5. Special Income Tax Rate for Specified Income: – 5% for income derived from illegal activities and certain specified conduct from 2025 onward. These adjustments reflect targeted efforts to shift tax burdens, incentivize economic behaviors, and sustain essential fund allocations through phased changes and new tax levies.
  6. Lottery Proceeds:Divert $100 million in lottery proceeds to the Public Employees’ Retirement System until a certain funded ratio is achieved.