Meridian and Lauderdale County residents will pay more at the pump but less at the register after two tax changes go into effect July 1.

 

House Bill 1, also called the Build Up Mississippi Act, was passed by the state Legislature and signed by the governor in March, making several changes to the way taxes throughout the state are calculated and collected. Among those changes were reductions in the state’s grocery tax and increases in the gas tax.

 

As of Tuesday, the tax on groceries, which the legislation defines as, “food or drink for human consumption that is eligible to be purchased with food stamps,” is set at 5% instead of the previous 7% tax.

 

“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 in a news release announcing the tax implementation. “We are excited to be able to administer this reduction to help provide relief on the cost of groceries to Mississippi families.”

 

Municipalities, which depend heavily on sales tax as their primary source of funding, will see a larger share of tax collections find its way to their coffers to help offset the loss of funding due to the grocery tax cut. As part of the legislation, the Department of Revenue will return 25.9% of sales tax collections to municipalities instead of the previous 18.5%. The bill also gave local governments the option of adding a local sales tax of up to 1.5% to bridge the gap as well.

 

HB 1 also made changes to the state’s long-stagnant gas tax, which is used to fund maintenance and repair efforts through The Mississippi Department of Transportation. The bill increased the state’s 18.4 cents per gallon tax to 21 cents per gallon effective Tuesday. Additionally, annual 3-cent increases to the gas tax are scheduled until the tax reaches a total of 27.4 cents per gallon.

 

According to the Tax Foundation, Mississippi’s gas tax was the second lowest in the nation prior to Tuesday’s increase. With the additional 3 cents, the state’s tax is still in the bottom ten.

 

Additional changes made by House Bill 1 include reductions to personal income tax from 4% to 3%. Additional reductions are dependent on the state meeting specific revenue benchmarks before they can take effect.

 

The bill also created a new tier to the state’s Public Employees Retirement System for future government employees. PERS has struggled with more than $20 billion in unfunded liabilities, and legislators, as well as local government officials, have called for changes to stabilize the system without overburdening the counties, municipalities, school districts and other entities that pay the employer share.