Outside Mississippi, legislators reacting as soaring property values hike property taxes

In Mississippi, when state government aims to implement tax reform the sights are usually set on individual or corporate income taxes, sales and use taxes, insurance premium taxes or so-called "sin" taxes on gaming, tobacco, liquor and beer.

After all, those categories of state taxes generated over 99 percent of all state General Fund receipts in Fiscal Year 2022 representing some $7.189 billion in total receipts. But emphatically, Mississippi relies on sales, use and income taxes as the prime movers in generating tax revenue.

Property taxes in Mississippi are primarily the province of county and municipal governments, so legislative debate of property tax issues is neither frequent nor particularly passionate unless fueled by local government advocates.

Based on national 50-state comparisons, Mississippi property taxes are considered in the lower third of the states and as a business climate indicator is ranked 38th by the Tax Foundation. One of the reasons that property taxes are low here is that state leaders during the administration of the late Gov. Mike Conner determined that one way of holding property taxes low for property owners was to shift to Conner's first-in-the-nation retail sales tax in 1934.

In the teeth of the Great Depression, Conner inherited a bankrupt state treasury and a $13.5 million state budget deficit. He left office two years later with a $3 million budget surplus – despite being targeted by armed protestors outside his Capitol office.

The success of the sales tax in broadening the state's tax base during the Depression gave it life well after the nation's economy recovered and the state's property taxes were the beneficiary. The shift of the tax burden from primarily property owners to all citizens was intentional.

The debate over Mississippi's sales tax is as fresh as the last gubernatorial campaign, but it is firmly part of Mississippi's overall tax structure.

Beyond the politics of it, Mississippi's property tax policy – including homestead exemption, economic development exemptions, industrial exemptions and other rules – creates an environment in which property tax rates remain low.

But the bottom line is that property taxes have historically remained low due to low property valuations in Mississippi.

Tax-rates.org reports: "The median property tax in Mississippi is $508.00 per year for a home worth the median value of $98,000.00. Counties in Mississippi collect an average of 0.52 percent of a property's assessed fair market value as property tax per year. Mississippi has one of the lowest median property tax rates in the U.S., with only three states collecting a lower median property tax than Mississippi."

That status is evolving in Mississippi as it has in other parts of the country. Property values are increasing in Mississippi and in some venues across the state, those increases are dramatic. Inflationary influences are also at play.

Mississippi's status as a relatively low property tax state isn't likely to change the growing trend nationally of state legislatures entertaining legislation designed to provide property tax relief to taxpayers who've seen their property tax levies soar along with the increase in their home's value.

In Mississippi, as in most states, increased home values will result in higher property taxes even if no increase in the property tax rate is levied. Higher home values equal higher taxes. Again, local governments take the lead in property taxes and are dependent on the revenue.

That's when political conflict is almost certain on this issue. Legislators will be asked for tax relief while local governments will resist any interruption of their tax revenue stream.

Legislators in other states have put forth property tax rebate legislation while some have introduced bills to adjust property assessments. Jared Walczak, vice president of state projects at the pro-business Tax Foundation, said he expects many other states to debate the issue this year.

"In virtually every state where the legislature meets this year, property tax relief bills will be filed," Walczak said. "This is a front-of-mind issue for many legislators across the country."

Given Mississippi's status as having Republican super majorities in both houses of the Legislature and GOP strength in many of the state's counties with the highest property values, can a showdown on property tax relief be too far in our future?

Sid Salter is a syndicated columnist. Contact him at [email protected].