Charlie Mitchell Column

Published 12:00 am Tuesday, November 18, 2008

Mitchell: Bad times could be good time to reinvent state taxation

Gov. Haley Barbour’s talk about the budget last week could have been about how recommendations of a study of state taxes might be enacted to gin up commerce in Mississippi while still providing ample money for state operations.

But that wasn’t to be. The global economic implosion has changed things.

It’s no time to tweak. It’s time to hunker down.

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At least that’s the official view.

The Final Report of the Governor’s Commission on Tax Reform, which took most of this year to compile, wasn’t even mentioned in press reports. That puppy appears headed for the shelf and, over time, a nice layer of dust.

Instead of how to improve and invigorate, the topic was where to cut.

When legislators convene on Jan. 6, they’ll face the fact that not all the money already allocated in this year’s budget is showing up. Things aren’t looking so good for the fiscal year that starts next July 1.

It’s error to think public financing is too complicated to think about. In the big picture, cities, counties and states do exactly what individuals and families do, just in more detail.

If we ponder using a credit card to buy a big-screen TV, we figure how much the payments will be and for how long. That determines whether we can afford it. Our calculations are based, most of the time, on what we believe our income will be.

Each year, the Joint Legislative Budget Committee and the Office of the Governor turn to economists and tax specialists on the state payroll to tell them how much money the state can expect to raise through all of its various taxes. That total is eventually pledged to all the state’s expected expenses, from salaries for university professors to copier paper for the Insurance Commission office.

If we have a loss in our income while still making TV payments, something has to give.

If the state doesn’t get the money it expected, then it can’t fulfill its commitments.

For this year’s budget, which has seven months remaining, Barbour directed cuts of 2 percent or $42 million to cover shortfalls in revenue from July through October. The reason is because that money, although expected when the budget was approved, did not show up.

The state has cushions. For one thing, when food and other prices rise the state gets more money, too. If a sandwich costs $1, the state gets 7 cents. If a sandwich costs $2, the state gets 14 cents. But when fewer people are working and there is less investment in new homes and businesses, the state sees payroll and property tax decline.

Barbour says and legislative leaders agree that there will be more cuts as the year progresses because the state’s income will continue to slide. They also believe that what they call essential services, which are also the most expensive services, will be funded at pledged levels. That includes the Mississippi Adequate Education Act, Medicaid, funding for higher education, for prisons and for debt service (the state’s version of a Visa card).

That means the $42 million will be recouped in lesser areas — law enforcement, environmental and pollution monitoring, general maintenance. Some jobs may go unfilled. It won’t take a lot of heavy lifting to trim a General Fund of more than $5 billion, especially since the state has $367 million in an unpledged rainy day fund.

But here’s the conundrum: In flush economic times, there’s no political imperative to review how the state receives its money. There’s plenty to go around. In leaner times, as now, the notion of altering the revenue mechanisms (with the exception of raising taxes) is deemed perilous. And the way this has worked in Mississippi, which has seen boom and bust cycles for about 20 years, is that there has never been a good time for a comprehensive tax overhaul.

Many said Barbour was not really serious when he appointed the commission in January. Members were to quietly write a report and then go away. Some legislative leaders were even hostile to the idea — opining that as the tax-writing arm of government the Legislature was perfectly able to separate “smart” methods of taxation (that encourage economic growth) from “not-so-smart” methods (that don’t).

Regardless, people should be aware that lots of states have been more innovative than Mississippi in finding ways to take money from the private sector to serve public needs. In good times or bad, it seems, people should expect leaders to streamline and add efficiency.

A bad economy shouldn’t be an excuse for the status quo if the tax study report shows there’s a better way.

(Charlie Mitchell is executive editor of The Vicksburg Post. Write to him at Box 821668, Vicksburg, MS 39182, or e-mail