Medicaid expansion would boost economy significantly more than Gunn income tax cut, studies show

Speaker Philip Gunn has proposed a complete elimination of the state's income tax, which accounts for about one-third of the state's general fund revenue. Courtesy of philipgunn.org

By Bobby Harrison
Mississippi Today

Expanding Medicaid would provide a significantly bigger boost to the Mississippi economy than the far-reaching tax cut proposed by House Speaker Philip Gunn, according to studies from the nonpartisan state economist’s office.

The studies reveal that expanding Medicaid would create more jobs and grow the state’s population and wealth more than would Gunn’s tax cut proposal that has passed the House and is pending in the Senate.

The Legislature is contemplating major tax legislation. The House plan, championed by Gunn, would eliminate the income tax, which accounts for about one-third of general fund revenue, cut the cost of car tags in half and reduce the tax on groceries from 7% to 4% while increasing the sales tax on other retail items from 7% to 8.5%.

The Senate has proposed a more modest plan that would cut the income tax and grocery tax and eliminate a $3 to $5 fee on the cost of car tags. Gov. Tate Reeves has proposed eliminating the income tax.

Neither the House nor Senate this legislative session is seriously considering Medicaid expansion, which would provide health coverage to at least 225,000 Mississippians. This projection mostly includes coverage for people who politicians often refer to as the “working poor” — Mississippians who are employed but cannot afford health insurance.

An analysis compiled in February by State Economist Corey Miller and Sondra Collins, a senior economist at the University Research Center, looks at Gunn’s House tax cut plan. This analysis has not been released publicly, but has been delivered to legislative leaders.

READ MORE: Mississippi would gain 21,700 jobs under Medicaid expansion

A September 2021 analysis was conducted by the same two economists to determine the impact of the state expanding Medicaid as is allowed by federal law and paid for in large part by federal funds.

The economic effects of the two analyses are stark. In 2024, Medicaid expansion would increase the gross domestic product, which is the value of the state’s goods and services, by $779.4 million, compared to just $317.9 million for the House tax cut. The GDP growth for 2027, the fifth year of Medicaid expansion, would be $777 million, but just $162.8 million for the tax cut. The state’s current GDP is nearly $100 billion.

In terms of growing the state’s population, which has been cited by Gunn and other leaders as one of the primary reasons for eliminating the income tax, expanding Medicaid would again provide significantly more bang for the buck. The tax cut would generate 3,748 people moving to Mississippi in 2024, according to the analysis, while expanding Medicaid would generate 7,757 new residents that same year. In 2027, the state’s population would swell by 11,505 by expanding Medicaid, while it would grow just 2,132 by enacting the House tax cut plan.

READ MORE: State economist refutes politicians’ claim that Mississippi cannot afford Medicaid expansion

Perhaps the most jaw dropping part of the analyses was the comparison of jobs and wages. In 2024, the study projected Medicaid expansion would create 11,526 jobs with an increase in personal income of $684.6 million. In the same year, the tax cut plan would generate just 4,457 new jobs with an increase in personal income of $213.5 million. In 2027, the Medicaid expansion would generate another 11,081 jobs with an additional $812.4 million in personal income, compared to 1,815 new jobs and an increase in personal income of $85.8 million for the tax cut plan.

“The additions to personal income (through Medicaid expansion) are larger each year from 2022 to 2027 and range from approximately $539 million to $812 million,” the study said. “The largest increase is in 2027 represents 0.7% of total personal income in Mississippi in 2019.”

But the analysis found that 60% of the jobs created by Medicaid expansion would be in health care and social assistance fields.

“An important caveat, however, is this estimate represents potential jobs,” the study pointed out. “Many healthcare jobs in Mississippi are currently unfilled.” To reach the projection, new workers would need to be found.

“An increase in Medicaid enrollees, in theory, could attract additional medical personnel and facilities to the state if these enrollees are viewed as a sustainable source of revenue,” the study surmised.

READ MORE: The Mississippi Republican income tax bet

The analysis of Medicaid expansion covers only five years, ending in 2027. But in each of those five years, Medicaid expansion provides more growth in terms of jobs, wealth and people than does cutting taxes.

The study of the tax plan goes until 2035, presumably covering the phase out period of the income tax.

Starting in 2032, the analysis projects that the tax cut plan would result in a loss of population, albeit a small loss, and a reduction in employment and personal income. By 2034 there also would be a reduction in the gross domestic product that by 2035 would be $11.6 million. There also would be reductions of 939 jobs, $166.7 million in personal income and 2,964 people in 2035.

The study cites as the reason for the losses the reduction in government services caused by less state revenue as a result of the full enactment of the tax cuts.

The Medicaid expansion study cites the reason for the significant economic boost to the large amount of federal money that would come to the state as a result of Medicaid expansion. Those federal funds would more than offset the cost to the state of expanding Medicaid while growing Mississippi’s economy, the study found. The state generally is responsible for 10% of the cost of Medicaid expansion.

Mississippi is one of 12 states to not have expanded Medicaid. Both Gunn and Reeves, the two most significant proponents of eliminating the income tax, have been vocal opponents of Medicaid expansion. Lt. Gov. Delbert Hosemann has publicly voiced support for expanding Medicaid, though he does not use the term “Medicaid expansion.”

Both studies from the economist’s office rely on projections applied to a Tax-Pi model, which is a widely used process among economists and others in developing projections based on government revenue and spending.

This story was produced in partnership with the Community Foundation for Mississippi’s local news collaborative, which is independently funded in part by Microsoft Corp. The collaborative includes Mississippi Today, MCIR, the Clarion Ledger, the Jackson Advocate, Jackson State University and Mississippi Public Broadcasting.

Mississippi Center for Investigative Reporting is a nonprofit news organization that is exposing wrongdoing, educating and empowering Mississippians, and raising up the next generation of investigative reporters. Sign up for our newsletter.


Note: Mississippi Today reporter Alex Rozier created the chart above based on the state economist’s office analyses of Medicaid expansion and the Gunn tax cut proposal.