Mississippi’s Pro Entrepreneur, Pro Growth Move to Phase Out Income Tax

By SBE Council at 16 April, 2025, 11:59 am

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by Raymond J. Keating -

Income taxes - imposed at the federal, state or local levels of government - are levies that strike a blow against the economic well-being of each person. Income taxes raise the costs of and diminish incentives for entrepreneurship, investment, saving and work. Toss in capital gains taxes, which are usually taxed at the same rate as personal income in the states, and matters get worse, since these are direct taxes on the returns on starting up, operating and investing in businesses.

No one escapes the ills when government decides to raise income and capital gains taxes, as the costs of entrepreneurship, investment and innovation ripple throughout our deeply intertwined economy.

In contrast, the positives of reducing income and capital gains taxes impact everyone, and deserve recognition and imitation. That's particularly the case when elected officials choose to eliminate income and capital gains taxes.

That's happening in the state of Mississippi.

Late last month, Governor Tate Reeves signed a bill into law that reduces the state's individual income and capital gains tax rate from 4 percent to 3.75 percent in 2027; 3.5 percent in 2028; 3.25 percent in 2029; and 3 percent in 2030. In subsequent years, if certain revenue/budget targets are met, the tax would be phased out fully.

While not ideal, given that the rate reductions and subsequent phase out periods are long, and put the elimination under a cloud of uncertainty, the reductions and the goal are positives, and worthy of praise and emulation by other states. The attractiveness of Mississippi as a state to live, work, and start up, operate and invest in a business, and its overall competitiveness, certainly is being enhanced.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. He is the author of " The Weekly Economist " book series, and 10 Points from Walt Disney on Entrepreneurship .