The CBPP reports shows that 33 states including Mississippi faced revenue shortfalls in Fiscal Year 2017 and will face them again in Fiscal Year 2018. In the southern region, Louisiana tracks Mississippi in facing shortfalls in 2017 and 2018 while Alabama avoided a FY 2017 shortfall but faces one in FY 2018.
Interestingly, no other Deep South states encountered revenue shortfalls in either fiscal year. West Virginia and Virginia are encountering shortfalls in both fiscal years. But the rest of the 33 states impacts are in the Midwest or the Far West and in New England. Alaska and Hawaii are also encountering the same problems.
How does the CBPP explain the revenue shortfalls? The organization offers a blanket explanation, which I’ll share with you verbatim:
Falling energy prices. States with energy-based economies have seen energy-related taxes plummet as oil prices have dropped. States with the greatest reliance on energy taxes like Alaska, Louisiana, Oklahoma, and West Virginia have struggled with budget problems since oil prices began to fall in 2014.
Tax cuts. Costly and ill-advised tax cuts enacted in recent years are suppressing some states’ tax collections. For example, 11 states have enacted large, phased-in tax cuts since 2011 that will cost a combined $8 billion a year once fully implemented.
Stock market growth. Sluggish stock market growth in 2015 and the beginning of 2016 slowed income tax collections. The stock market rebounded starting in late 2016, but income tax collections are now lagging expectations as wealthy taxpayers appear to be postponing selling stocks and other assets in the hope that President Trump and Congress will cut capital gains tax rates.
Slower-than-average sales tax collections. Despite the economic recovery, sales tax collections are below their historical average as consumers have remained cautious long after the end of the recession and untaxed Internet sales have continued to grow.
So does this explanation track Mississippi’s revenue woes? Yes, to a strong degree, but not completely.
Falling energy prices certainly impacted Mississippi, which had in recent years become a rather vibrant energy-producing state. Gov. Phil Bryant told an energy symposium in 2012: “We are on the cutting edge of global energy technologies right here, right now in Mississippi. And we can accomplish energy sector economic development in Mississippi in an environmentally responsible way.”
Bryant told the symposium that he embraced an “all of the above” concept of growing and developing an already robust energy industry in Mississippi for the future. “All of the above” includes CO-2 carbon sequestration, “fracking” and other controversial energy recovery methods, nuclear power expansion, so-called “green” energy, and technology-based efficiency and conservation methods, among others.
But the fall of energy prices was felt across all those sectors. Tax cuts are part of the revenue issue in Mississippi, but most of the state’s large tax cuts have yet to take effect. That reality will become more readily quantifiable in the 2018 fiscal year, but the expectation is that it will be substantial.
Stock market growth may well be an issue in much of the country, but as the poorest state in the union Mississippi is less likely to be strongly impact by that factor than, say, Connecticut.
Slower-than-average sales tax collections are definitely a factor in Mississippi, where sales tax is the bedrock of the state’s General Fund revenue stream. Without question, the continued growth of untaxed internet sales erodes sales tax collections heretofore made by bricks-and-mortar merchants.
Another factor is less accepted by national economists, but is a long-held belief of Mississippi lawmakers and others who observe the state’s economy – and that is that Mississippi is slower to go into economic declines and slower still to come out of them than the rest of the country.
Sid Salter is a syndicated columnist. Contact him email@example.com.