Sections 1 through 13 and Sections 25 through 29 effective 7/1/25,
Sections 15 through 24 effective 3/1/26. Bill was signed into law 3/27/25.
This bill revises various sections of law relating to income tax, sales tax, use tax, fuel excise taxes.

Income Tax
The bill amends Section 27-7-5 to reduce the state income tax on individuals for income in excess of $10,000 as follows:
• For calendar year 2027, a rate of 3.75%;
• For calendar year 2028, a rate of 3.5%;
• For calendar year 2029, a rate of 3.25%; and
• For calendar year 2030 and all calendar years thereafter, except as otherwise provided below, a rate of 3%.

The bill provides a method for determining whether the state income tax on individuals for income in excess of $10,000 will be reduced below 3%. For calendar year 2031 and any calendar year thereafter, if the Working Cash Stabilization Reserve Fund is fully funded, the income tax imposed on all taxable income of individuals in excess of $10,000 will be reduced by a percentage as indicated below, depending on the percentage by which the Adjusted General Fund Revenue Collections for a fiscal year (beginning with fiscal year 2029) exceed the Appropriations for the following fiscal year (beginning with fiscal year 2030):
• If the excess is at least 0.85%, but less than 1%, of the cost of a 1% cut, the tax will be reduced by 0.2%;
• If the excess is at least 1%, but less than 1.15%, of the cost of a 1% cut, the tax will be reduced by 0.25%; and
• If the excess is at least 1.15% of the cost of a 1% cut, the tax will be reduced by 0.3%.
The bill provides the following definitions for purposes of determining future income tax rate reductions:
• "Adjusted General Fund Revenue Collections" means State General Fund revenue collections adjusted by removing any nonrecurring State General Fund revenue collections, which figure shall be provided annually to the Commissioner of Revenue by the Legislative Budget Office on or before October 1 for the prior fiscal year (beginning October 1, 2029, for fiscal year 2029 revenue collections) and presented at the next meeting of the Joint Legislative Budget Committee.
• "Appropriations" means the total amount contained in all deficit appropriations bills that are recurring expenses in State Support Funds and all General Fund appropriation bills passed into law, but not including any additional appropriations in excess of statutory required employer rate for the Public Employees' Retirement System of Mississippi, which figure shall be provided annually to the Commissioner of Revenue by the Legislative Budget Office on or before October 1 for the current fiscal year (beginning October 1, 2029, for fiscal year 2030 appropriations) and presented at the next meeting of the Joint Legislative Budget Committee.
• "Cost of a 1% cut" means the reduction in individual income tax collections that would result from a 1% reduction in the tax on all taxable income of individuals in excess of $10,000, which figure shall be provided annually by the Commissioner of Revenue to the Legislative Budget Office on or before December 15, based on data from the prior calendar year (beginning December 15, 2029, for calendar year 2028); however, if any filing extensions were granted by the commissioner under Section 27 7 50, the commissioner shall provide the Legislative Budget Office with an updated cost of a 1% cut before the end of the next regular legislative session.

Sales Tax and Use Tax
The bill amends Section 27-65-17 to reduce the tax rate on retail sales of groceries to 5% from and after July 1, 2025. It also amends Section 27-65-75 to revise various diversion percentages for sales tax revenue collected from sales of groceries after the reduction of the tax rate on these sales.
The bill amends Section 27-67-31 to revise the distribution of use tax revenue after the reduction of the sales tax on groceries. The distribution rate of 15% to municipalities and 15% to counties for infrastructure is maintained, except that revenue col lected from the use tax corresponding to the 5% grocery sales tax is distributed at the rate of 21% to municipalities and 21% to counties.
The bill amends Section 27-67-35 to provide that monies in a special fund consisting of use tax revenue distributions to be expended by municipalities for infrastructure also may be expended for the acquisition and/or rehabilitation of buildings.
Full Summary of House Bill 1

Fuel Taxes
The bill amends Section 27-55-11 to increase the excise tax on gasoline (18¢ per gallon under the prior law) as follows:
• 21¢ per gallon from 7/1/25, through 6/30/26;
• 24¢ per gallon from 7/1/26, through 6/30/27; and
• 27¢ per gallon from 7/1/27, until the first day of the month immediately following the date upon which the Mississippi
Transportation Commission and the State Treasurer make certain certifications under Section 65-39-35.

The bill also amends Sections 27-55-519 and 27-55-521 to make the same excise tax rate revisions for special fuels such as diesel fuel and kerosine.
Beginning July 1, 2029, and on July 1 of every other year thereafter, the excise tax rates will be adjusted by the percentage change in the yearly average of the National Highway Construction Cost Index issued by the U.S. Federal Highway Administration for the most recent twelve month published period ending December 31, compared to the base year average, which is the average for the twelve month period ending December 31, 2025, and rounded to the nearest whole cent. The maximum amount of increase in the excise tax rates will not exceed 1¢ per net gallon of gasoline or special fuel and will take effect every other year.

The bill amends Section 27-5-101 to provide for the apportionment of the revenue from the portion of the excise tax on gasoline and special fuels that exceeds 18¢ per gallon as follows:
• 23.25% will go to the Office of State Aid Road Construction;
• 2.75% will go to the Strategic Multi-Modal Investments Fund created in Section 65-1-901; an
• 74% will go to the Mississippi Department of Transportation for constructing, maintaining or improving segments of highways and bridges under its jurisdiction, and for operational improvements on such segments, in accordance with a project schedule as reported in the Three-Year Plan as adopted, amended by or reissued by the Mississippi Transportation Commission under Section 65-1-141.

The bill amends Section 27-65-75 to revise the distribution of revenue from the excise tax on gasoline and special fuels that is
apportioned under Section 27-5-101(ii)(a)1 and (iii) and deposited to the credit of the State Aid Road Fund as follows:
• On or before 9/15/25, and monthly thereafter through 8/15/26, $5,000,000 or an amount equal to 23.25% of those funds, whichever is greater;
• On or before 9/15/26, and monthly thereafter through 8/15/27, $6,500,000 or an amount equal to 23.25% of those funds, whichever is greater; and
• On or before 9/15/27, and monthly thereafter, $8,000,000 or an amount equal to 23.25% of those funds, whichever is greater.

The $4,000,000 of revenue from the excise tax on gasoline and special fuels allocated and deposited monthly to the credit of the State Aid Road Fund under the prior law will continue through August 15, 2026.