Missouri’s Tax Code Was Built for a Different Economy
Families can move. Workers can work from anywhere. Businesses can expand where the climate makes sense. Retirees can choose where their savings go further.
Missouri’s tax code was built for a different economy.
This is our chance to modernize it.
A simpler, flatter, more competitive tax code puts Missouri on a responsible path toward eliminating the income tax.
Missouri is already moving
Missouri cut its top individual income tax rate from 6% to 4.7%. That top rate now applies at just $9,191 of taxable income.
The “top” rate reaches ordinary working Missourians.
In 2025, Governor Mike Kehoe signed HB 594, making Missouri the first state in the country to fully exempt individual capital gains from state income tax.
HJRs 173 and 174 go further by creating a constitutional path to phase out the individual income tax.
The proposal would reduce the rate by 0.01 percentage points for every $20 million in net general revenue collected above the FY2025 baseline, adjusted for inflation. The plan allows reductions of up to 1.6 percentage points per year and aims to eliminate the income tax by January 1, 2032.
The rate falls when revenue grows. If the growth is not there, the rate holds.
Grow first. Cut second.
The competition has changed
The Tax Foundation’s 2026 State Tax Competitiveness Index ranks Missouri 12th overall.
But Missouri ranks only 17th on individual income taxes.
That’s the gap.
No-income-tax states dominate the top tier. Wyoming, South Dakota, New Hampshire, Alaska, Florida, Texas, and Tennessee all rank in or near the top 10. Tennessee ranks 8th. Texas ranks 7th. Florida ranks 5th.
Missouri is ahead of many states. But the states with no income tax are playing a different game.
Iowa shows what serious Midwestern reform can look like. Iowa cut its top income tax rate from 8.98% in 2018 to a flat 3.8% in 2025 while maintaining a $1.83 billion budget surplus and $902 million in cash reserves.
Oklahoma enacted a trigger-based path toward eventual income tax elimination, while Kentucky and Mississippi adopted structured mechanisms for continued reductions.
Arkansas is cutting. Tennessee has eliminated its income tax. Texas and Florida have long had no income tax.
We don’t need to invent the model. We just need to get in the game.
People are voting with their feet
The top 10 population-gaining states had an average top income tax rate of 3.92%. The top 10 population-losing states averaged 8.80%, more than double. Per-capita state and local tax collections were about 60% higher in the top 10 losing states than in the top 10 gaining states.
The data is clear.
Missouri gained about 57,000 domestic migrants from 2020 to 2025, even as deaths exceeded births.
The tax cuts already enacted are working. It’s time to level up.
Illinois shows the alternative. It ranks 47th overall in the Tax Foundation index. and lost $6 billion in taxable income to outmigration in 2023.
Why triggers matter
Eliminating the income tax is serious business.
Missouri’s individual income tax is the largest source of state general revenue.
Kansas shows what can happen if tax cuts are not done correctly.
The Kansas tax experiment cut too much too quickly, created a major pass-through business income loophole, lacked proper revenue triggers, and failed to impose enough spending discipline.
Revenue triggers make tax relief conditional on actual growth. If Missouri revenues rise above the baseline, rates go down. If revenues do not rise, rates hold.
Grow first. Cut second.
Build a modern tax code
Government costs money. Roads cost money. Schools cost money. Public safety costs money.
Voters know that.
They also know Missouri’s current tax system does not make much sense.
The tax code should be built around the economy Missourians actually live in:
- – lower taxes on work
- – fewer distortions
- – more transparency
- – a stronger position against competing states.
The current tax system is not simple.
Missouri has 216 sales tax exemptions and more than 2,526 separate sales tax jurisdictions.
The sales tax issue has to be handled honestly.
State sales tax bases have narrowed for decades as the economy shifted from goods toward services. The average state sales tax base covered only 29.71% of a state’s economy in FY2021, down from 49% in 1970.
As more spending moves into untaxed services, the sales tax covers less of the real economy, which means the state has to raise rates or modernize the base to generate the same revenue.
Missouri has another problem. In 2016, voters passed Amendment 4, which prohibited expanding the sales tax to services not already taxed as of January 2015. HJRs 173 and 174 would allow sales tax to be applied to services to pay down income tax rates.
Missouri’s economy is growing organically. We could implement the revenue triggers in HJRs 173 and 174 and pay down the income tax rate as revenues go up organically, but it would take a very long time.
By addressing the special interest exemptions in our sales tax code, we can move toward zero income tax on a competitive timeline.
The Path Forward
Missouri is already competing.
We can keep patching an outdated tax code, or we can build a modern system that rewards work, attracts investment, and helps Missouri win the next generation of growth.
The path forward is clear:
- Reduce the income tax.
- Use revenue triggers.
- Control spending.
- Modernize the tax code.
- Protect working families.
- Tell voters the truth.
Missouri should not settle for being better than Illinois.
We should build a tax code for the future.
Andy Bakker
Executive Director
Liberty Alliance USA