Mississippians will pay less for groceries beginning July 1 as a new law lowering the state’s grocery tax goes into effect.

 

“The decrease is part of House Bill 1 that passed during this year’s regular session of the Mississippi Legislature,” said MDOR Commissioner Chris Graham. “We are excited to be able to administer this reduction to help provide relief on the cost of groceries to Mississippi families.”

 

Legislators earlier this year passed the Build Up Mississippi Act which, among other things, reduces the tax paid on groceries from 7% to 5% with additional decreases coming later on. The bill defines groceries as food or drink for human consumption eligible to be purchased under the Supplemental Nutrition Assistance Program, also called food stamps. The sales tax on non-grocery items will remain unchanged at 7%.

 

Making food less expensive means Mississippi residents will have more money to spend on other things, less stress and fewer children in our state will go hungry. The effort by legislators to reduce the grocery tax will help people throughout the state and cannot be applauded enough.

 

That being said, economists, elected officials and journalists alike will be watching local government coffers very closely to see what impact the reduced taxes will have on city budgets.

 

Unlike counties, which get the bulk of their funds from property taxes, municipal governments in Mississippi are funded primarily through sales tax. Taxes are collected by the state Department of Revenue and 18.5% of it is then redirected to the local city government where it is used to pave roads, build parks and pay police officers.

 

Cutting the amount of tax collected on groceries will have a direct impact on the amount of money cities have to spend.

 

Fortunately, the state Legislature predicted the shortfall to cities and in the same bill increased the amount of tax funds sent by the state from 18.5% to 25.9%. Local governments also have the option of implementing a local sales tax up to 1.5% as well.

 

Gov. Tate Reeves and House Speaker Jason White, R-West, were vocal about their desire to eliminate the state income tax, and The Build Up Mississippi Act is an aggressive vehicle to get that done. The grocery tax, favored by Lt. Gov. Delbert Hosemann, was included as part of a larger tax overhaul that also included increases to the state’s gas tax.

 

With such dramatic changes to the state’s funding mechanisms, it seems likely there will be some unintended secondary and tertiary effects. You can bet cities throughout the state will be keeping a close eye on their bank accounts to make sure the state’s math adds up.