Ellington

Closing corporate tax loopholes, changing income-tax structures and increasing human capital are a few recommendations policy leaders made this morning to improve Mississippi's economic future.

Attendees at the Mississippi Economy Policy Center's annual conference at the Jackson Marriot today are focusing on policies that could improve the economy and provide Mississippi families with the resources needed to obtain financial security. The conference began this morning with a panel discussion with state economist Darrin Webb, Capitol correspondent Bobby Harrison and Associated Press reporter Emily Wagster-Pettus.

Webb said that one indicator of the state of Mississippi's economy is the number of building permits the state has issued this year. In 2005, before Hurricane Katrina, the state issued 7,615 building permits during the first seven months of that year. For the same period this year, the state has only issued 2,580 building permits. Slow economic growth will be the "new norm" in Mississippi, Webb predicted.

"This is a 66 percent decline in building permits," Webb said. "This means that right now, on average, we are issuing about 300 building permits per month, which is much slower than we were before 2005. That is a tremendous loss of economic activity. That means we aren't building houses, and that affects furniture sales, construction and so much of the economy."

Webb said lawmakers should focus on improving the state's "human capital," the skills, education and ability of individuals to perform labor. The state's high dropout, teenage pregnancy and obesity rates--in addition to lack of higher education opportunities for low-income individuals--hinders economic prosperity, Webb said.

"Until Mississippi addresses its human capital issue, then I see Mississippi continuing to get further and further behind the nation," Webb said.

The conference's first breakout session "Budget and Tax: Tax Reform and Job Creation for a Strong State Economy," addressed tax reform options to create more revenue for the state.

"I want to challenge some of the dominant messages out there about taxes and the economy," MEPC Senior Policy Analyst Sara Miller said. "Most of what you are hearing is that we can't raise taxes in an economic downturn because its hurts the economy. But we need more revenue in order to provide the services we need like education and workforce development, so that we can make a strong recovery."

Instead of increasing taxes, the Legislature has implemented budget cuts, advocated by Republican Gov. Haley Barbour and his administration, which have hurt areas such as education and social services.

"State budget cuts are hurting jobs," Miller said. "Over 5,000 state and local jobs have been lost since 2009. During that time, the public sector gained a little over 5,000 jobs, so they are canceling each other out. But our recovery is being stifled by budget cuts that are making us lose jobs."

The state is heavily reliant on sales-tax revenue, but the majority of services do not charge sales taxes. In the past 30 years, services have become a large part of the economy instead of goods. Citing the governor's tax commission study released in 2008, Miller said that if the state added sales taxes to 21 services from businesses such as beauty salons and fitness clubs, Mississippi would gain an additional $98 million in revenue.

Miller also recommended that the state create additional income tax brackets for people making $45,000 and $100,000. Miller said that income taxes in Mississippi have remained the same for the past 25 years, even though the top 20 percent of earners now experience twice the rate of income growth compared to the bottom and middle 20 percent of earners in Mississippi.

Other recommendations included closing corporate tax loopholes, as 80 percent of all corporations in Mississippi pay zero income tax. Miller said that many corporations shift their income out of state when they report earnings.