On March 27, 2025, Mississippi made a significant stride towards economic reform by initiating the gradual elimination of its personal income tax. Governor Tate Reeves, a Republican, signed into law House Bill 1, dubbed the “Build Up Mississippi Act.” This landmark legislation sets the state on a path to join a select group of states that do not levy personal income taxes on their residents, with full implementation anticipated over the next several years.
Governor Reeves, expressing his enthusiasm for the bill's passage, remarked, “Mississippi will no longer tax the work, the earnings, or the ambition of its people.” This statement underscores a broader vision to enhance Mississippi's attractiveness to families, workers, and investors by reducing the tax burden and, by extension, government involvement in personal finances.
The "Build Up Mississippi Act" outlines a careful strategy to reduce the current income tax rate of 4.4% to 3% by the year 2030. Commencing in 2026, the state will enact annual rate reductions of 0.25%. These reductions are contingent upon meeting certain state revenue growth benchmarks, continuing each year until the income tax rate is fully phased out.
This legislative move is the culmination of years of effort by Governor Reeves, who has championed income tax elimination since his tenure as lieutenant governor. The governor views this as a victory for working families and a pivotal moment that will transform Mississippi into a hub for talent and investment.
Mississippi will no longer tax the work, the earnings, or the ambition of its people. ~ Governor Tate Reeves
However, the elimination of income tax is balanced by trade-offs aimed at offsetting the resultant revenue losses. A notable measure is the incremental increase in the gasoline tax, set to rise by three cents per gallon each year for three years starting in July 2025, ultimately reaching 27 cents per gallon by 2027. Additionally, the legislation includes a provision to reduce the grocery sales tax from 7% to 5%, offering some financial relief to Mississippi families.
The governor credits the legislative leadership, including Speaker Jason White and Lt. Gov. Delbert Hosemann, for their roles in passing this transformative bill. This legislative move aligns Mississippi with states like Texas, Florida, and Tennessee, which have similarly eliminated state income taxes to foster economic growth and attract new businesses and residents.
As Mississippi embarks on this ambitious tax reform, it joins a unique group of ten states that do not impose an income tax. This policy is often seen as a way to lower living costs and offer potential savings to residents, although it requires balancing through other forms of taxation such as higher sales, property, or tourism taxes.