Missouri’s Income Tax Problem Isn’t What You Think
Missouri is in a quiet competition it cannot afford to lose.
Our two biggest economic engines, Kansas City and St. Louis, do not sit neatly inside state lines. They spill across them. People live, work, and make decisions on both sides every day. The choice of where to live depends on commutes, safe communities, and tax decisions.
St. Louis is similar, even if no one is moving to Illinois for tax relief.
When your major metros cross state lines, your tax policy is always being compared in real time.
People can move more easily. Businesses can relocate. Remote work makes geography flexible.
Missouri’s ancient tax system is not built for that.
Now that the income tax elimination plan has serious legs, the question for those of us who want to grow Missouri is not whether to modernize, but how.
Don’t tax what you want more of
Income taxes fall directly on work, investment, and entrepreneurship.
Economic research finds that taxes on income are more harmful to growth than taxes on consumption. Shifting from income taxes to consumption taxes can increase economic output by reducing distortions on work and investment.
Most people understand that cigarette taxes are high because the government wants to disincentivize smoking.
If Missouri wants more work, more business formation, and more upward mobility, it should stop taxing income.
A modern economy needs a modern tax base
Missouri’s tax system is built for an outdated goods economy. The modern economy is dominated by services.
That mismatch creates a narrow tax base and pushes rates higher than they otherwise need to be. Broadening the sales tax to include services addresses both problems. The bipartisan National Conference of State Legislatures has long argued that consumption taxes work best when applied broadly across goods and services.
The goal is a wider base and fewer distortions, not higher rates.
Competition is real
Missouri does not operate in a vacuum. It competes with other states for people, jobs, and investment.
State income taxes influence migration decisions, especially for higher earners.
At the same time, many high-growth states have no income tax at all.
In a world of remote work and mobile capital, marginal differences matter. They shape where people live, where businesses start, and where capital flows.
That’s why New York is losing population while Texas and Florida are gaining.
Missouri can’t ignore that.
This is not about cutting revenue
Despite opponents’ claims, Missouri’s income tax elimination plan is not a backdoor to cutting government services.
If the legislature wanted to do that, it wouldn’t need voter approval.
The legislature is instead referring a Constitutional Amendment to the voters to make a structural change that will make our tax system more competitive.
A well-designed shift from income taxes to a broad consumption tax maintains funding while improving incentives.
Other states have done this successfully. There’s no reason to think we can’t.
A revenue-neutral swap could increase long-run economic output by around 1 to 1.5 percent.
That is not explosive growth, but it is meaningful over time.
Opponents want you to believe that this plan simultaneously raises taxes and cuts revenue.
Neither is true.
The choice
Missouri can keep a tax system that penalizes work and under-taxes the modern economy.
Or it can move to one that rewards earning and investing, reflects how people actually spend, and competes for growth.
It’s not an ideological case that’s being made. It’s a practical one.
Missouri should stop punishing work, modernize its tax base, and prove it is serious about growth.
Tax income less.
Tax consumption broadly.
Compete to win.
Andy Bakker
Executive Director
Liberty Alliance USA