JACKSON — Gov. Haley Barbour’s tax study commission is suggesting the Legislature remove sales tax exemptions for nonprofit groups and various services to generate more revenues and use some of that money for lowering income or grocery sales taxes.

“We could broaden the tax base so we can lower other rates,” said commission Chairman Leland Speed.

The 38-member commission on Wednesday finalized a wide array of recommendations being sent to the governor and the Legislature for cutting some taxes and increasing others. However, legislators and commission members say they don’t expect much will actually be enacted into law.

The recommendations could be largely shelved, but the commission’s eight-month study on taxes was worthwhile, Speed said.

“This whole exercise is like going to the doctor and getting a physical,” he said.

After estimating Wednesday that its suggested tax changes could result in about $100 million more in revenues, the commission suggested lawmakers consider more income tax cuts as well as a reduction in the grocery sales tax.

Comparatively low

However, the commission’s study found that Mississippi’s income and sales taxes are already low compared to other states.

Mississippi’s 7 percent sales tax on groceries — along with three other states — has been the country’s second-highest state levy. However, many states are actually higher when local sales taxes are added into the mix, according to the commission’s study. Mississippi’s local sales taxes are limited.

The commission did vote for city councils having blanket power to get voters’ approval of sales tax increases to generate revenues for specified projects, such as road improvements or tourism development. Currently, municipal governments individually must get the state Legislature’s permission to add a local assessment to the state-levied 7 percent sales tax.
The commission wants municipalities to be able to raise the sales tax if at least 60 percent of local voters approve the increase. The tax should be temporary and be discontinued when enough revenues are generated to pay for the projects to which the funds are being directed.

The Legislature has rejected such local-option sales tax bills in the past.

Cigarette tax

The commission voted to increase the cigarette tax to 50 cents a pack, which is the average of the four surrounding states. Mississippi currently charges 18 cents per pack. The Legislature has passed bills to increase this tax in the past, but Barbour vetoed them. However, he has indicated he’ll let this tax be increased as recommended by his tax study commission and approved by the Legislature.

The commission said the state can expand its sales-tax base by including newspapers and various services like haircuts, lawn mowing and data processing that are currently exempt. This could generate more revenues for government and encourage tax cuts elsewhere.

The commission also approved removing sales tax exemptions for nonprofit groups. The state does not provide a blanket exemption for sales to nonprofit organizations, but specific groups have been exempted on a piecemeal basis by the Legislature.

“Many are not included, and there is no apparent basis for the distinction among charitable organizations,” states the commission’s report.

The largest category among these exemptions is for nonprofit hospitals.