Ask Republicans in Mississippi government about state spending, and many will tell you they want to “starve the beast.”
By that they mean they want to force less government spending through tax cuts that reduce revenue. At the same time, though, they contend that these tax cuts will encourage spending and investment, which will ultimately boost state revenues more than what’s lost from the tax cuts.
If the past couple of years mean anything, Republicans are doing a fine job at their first mission but not so well at proving the second.
Last week, Gov. Phil Bryant had to cut the state budget for the fourth time in the past year, ordering a $20 million reduction in spending and taking another $39 million from the rainy-day fund of cash reserves to plug some of the holes. That’s because the state’s economy has been unable to produce as much revenue as legislative budget writers expected when they set the spending plan for the year ending June 30.
This begs some questions: Since Mississippi Republicans proclaim themselves to be so business-friendly, why is it taking so long for business in the state to respond? Could it be that the Legislature’s tax-cutting choices have been mistargeted?
Over the course of the current budget year, the governor has cut $171 million from roughly $6 billion in spending — a little less than 3 percent. He also has taken $50 million from the rainy-day fund and said last week the Legislature will have to give him authority to spend more of those cash reserves.
The lagging tax revenues have also prompted lawmakers to reduce the size of next year’s budget by at least $175 million. This is based on estimates that say tax collections will be flat during the coming year. As a result, based on the rough outlines lawmakers released over the weekend, most state-funded operations will see additional cuts, some of them in double-digit percentages.
Mississippi always tends to be late in recovering from a recession, and there are no indications that this pattern has changed. The state’s unemployment rate, however, continues to fall, so maybe this is a sign that the business activity is rebounding. Republicans who control state government have to be praying for a little good news from the economy.
Until that happens, though, it would be unwise for the GOP leadership to press forward with tax cuts that are likely to compound the state’s present budget bind.
Besides the weak economy, one of the main reasons the state budget has become so difficult is the dozens of tax cuts the Republican majorities have pushed through the Legislature and that Gov. Phil Bryant has signed over the past five years. It’s estimated that the 40 or so already in place will cost the state treasury more than $350 million next year — and that’s not counting the largest tax cut in state history, which is set to begin its 10-year phase-in on July 1.
Those upcoming reductions in corporate franchise, personal income and self-employment taxes should be postponed at least until revenues pick up, which they will if the GOP’s “trickle-down theory” of economics bears out. But if it doesn’t, if revenues stay sluggish, then lawmakers may have to reconsider whether the state can afford to cut any taxes without raising others to offset the impact.
If lawmakers plunge forward and let this next round of tax cuts take effect, they are making it likely that this year’s budget trauma — and its series of mid-year cuts — will be repeated next year, and it may be even worse.
