JACKSON, Miss. (WJTV) – The Mississippi Senate amended and passed House Bill 1 in order to eliminate the income tax and reduce the grocery tax.

According to Lt. Governor Delbert Hosemann (R-Miss.), the bill would also invest in infrastructure and stabilize the Public Employees’ Retirement System’s (PERS) $26.5 billion unfunded liability while not raising sales tax.

Hosemann said key provisions of HB 1 now include:

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• Lower Grocery Tax: Reduces the grocery tax from 7% to 5% effective July 1, 2025, saving
  taxpayers an estimated $127.5 million annually.
• Income Tax Elimination: Gradually reduces the individual income tax from 4% to 3% by
  2030, followed by annual reductions of 0.2%, 0.25%, or 0.3% based on economic triggers.
• Infrastructure Investment: Provides an additional $212 million in infrastructure funding
  through a phased three-year gas tax increase of 3 cents per gallon annually, totaling a 9-cent increase while keeping Mississippi below the Southeastern gas tax average.
• Stabilize PERS: Introduces a new Tier 5 plan for all new state employees beginning March 1,
  2026, to address the $26.5 billion unfunded liability and stabilize the system, preventing further growth in liabilities. All current enrollee’s will receive their promised benefits, including the “13th check.”
• No sales tax increase: Removes the increase on sales tax in HB1. In a complementary bill, the Senate proposes adjusting the state’s rainy-day fund from 10% to 12%, with a further increase to 13% in 2030, to strengthen Mississippi’s financial reserves amid national inflationary adjustments.

“Creating a path to responsibly eliminate the income tax while not raising sales tax and stabilizing the PERS system has been a priority for Senate leadership. We cannot discuss eliminating the state’s second-largest revenue source without addressing our $26.5 billion unfunded liability as recommended by the PERS board.” said Hosemann. “Our top goal remains delivering tax relief for all Mississippians while making fiscally wise decisions.”

HB 1 now returns to the Mississippi House of Representatives for concurrence or nonconcurrence.