Today may only be the primary election date in Missouri, but it will also decide the fate of one of the most impactful ballot measures of the year: Missouri Amendment 5. Amendment 5 asks voters to temporarily suspend provisions in the state constitution restricting the expansion of the sales tax base to use increased sales tax revenue to eliminate the state income tax.
Missouri’s income tax remains a key roadblock preventing the state from becoming more prosperous. While Missouri has reduced its income tax rate by 0.7% in the past few years, nearly all of its neighbors have either adopted a lower tax rate or laid out plans to cut their income tax rate further.
Without Income Tax Fix, Missouri Is Falling Behind Its Neighbors
State | Top Rate | Trigger Floor | Migration (2022) | Top Rate (2022) |
Tennessee | 0% | 0% | Gains every 12m, 5s | 0% |
Iowa | 3.8%* | 3.8%* | Loses every 5hr, 58m | 8.53% |
Kentucky | 3.5%* | 0% | Gains every 1hr, 29 m | 5% |
Arkansas | 3.9% | 3.9% | Gains every 46m, 15s | 5.5% |
Oklahoma | 4.5% | 0% | Gains every 41m, 45s | 4.75% |
Nebraska | 4.55% | 3.99% | Loses every 4hr, 36m | 6.84% |
Missouri | 4.7% | 4.5% | Gains every 59m, 28s | 5.4% |
Illinois | 4.95%* | 4.95%* | Loses every 9m, 42s | 4.95%* |
Kansas | 5.58% | 4%* | Loses every 2hr, 9m | 5.7% |
*State has a flat individual income tax.
But, while becoming less competitive on tax policy has its costs, there is the other side of the coin to consider as well. Neighboring Tennessee has been a prototype for how a state can become more attractive and grow rapidly by standing out as a low-tax state. Missouri is right to aim in that direction, though it would require careful and thoughtful policymaking to ensure that it is done right, without budget shortfalls or taxation of business inputs, should Amendment 5 pass.
If Amendment 5 fails to receive voter approval, Missouri shouldn’t view this as the end for income tax reform. Setting out a pathway to get to zero income tax, even if it doesn’t happen overnight, is a worthwhile and laudable goal.
Toto, I Have a Feeling . . .
Like many Americans, some Missourians have spent the past decade and a half being told that all tax cuts will end up like Kansas. Despite the fact that more than two dozen states—including, the second time around, Kansas—have since successfully cut their income tax in a sustainable and successful manner, the 2012 Kansas tax cut failure continues to occupy outsized space in many minds.
So, my colleague Joe Bishop-Henchman, who criticized the 2012 Kansas tax cut at the time for being poorly designed and irresponsible, took to the Kansas City Star to tell Missourians that they’re not in Kansas anymore. Check out his op-ed, which explains how Missouri can become more like Tennessee and less like Illinois without making the same mistakes as Kansas.