Republicans are advancing legislation that would allow taxpayers across Missouri to keep more of their own paychecks while also attracting new jobs and opportunities to the state. This would be a huge win for all Missourians.
On the heels of delivering the largest tax cut in Missouri history, which took the top individual income tax rate from 5.2% to 4.95% on January 1, 2023, legislators are already working to deliver another round of pro-growth tax cuts.
Every time the Republican led Missouri General Assembly has cut taxes over the past 10 years, Missouri’s budget has grown. So, to any who argue that cutting taxes reduces state revenue, the reality is the extreme opposite has been true. In fact, over the past decade, Missouri’s annual budget has grown from under $30 billion to now nearly $50 billion per fiscal year.
With this significant growth in government revenue, one of the priorities should be to return as much taxpayer money to the taxpayers as reasonably possible.
To that end, the state House of Representatives recently approved a bill that would immediately reduce the top individual income tax rate – the rate that applies to most income taxpayers and is used to make decisions about investment – from 4.95% to 4.5% . Then, as certain revenue targets are met, the rate would be reduced even further until it hits 4.05%.
This bill, House Bill 816, which was approved on a strict party line vote, would allow individual taxpayers, families and small businesses to keep their own money in their wallets and their business operations. It would also ensure Missouri keeps up with the growing movement toward low and no state income taxes.
As people and jobs continue to flee high-tax states and flood into states that impose low and no income taxes, more and more states are working to reduce these taxes and put them on the path to zero. Currently, there are nine states – Texas, Florida, Tennessee, Alaska, New Hampshire, Nevada, South Dakota, Washington and Wyoming – that do not tax workers’ wages at all.
But that list will soon grow. Over the last few years, key officials in roughly a dozen states have announced their intentions to make their states appear on the “no income tax” list and have taken significant steps in that direction.
Arizona lawmakers recently streamlined their graduated income tax, which had a top rate of 4.5%, to a flat rate of 2.5%. Republicans in both the House of Representatives and Senate have made clear that this was “step one” on the path to phasing out Arizona’s income tax completely, and are currently advancing a bill that would use ongoing surplus revenues to further reduce the income tax rate.
Iowa and Mississippi, thanks to legislation passed last year, will have flat income tax rates of 3.9% and 4% by 2026. Republican lawmakers in both states have also announced that these historic tax cuts were the first step toward eliminating their income taxes.
Kentucky now has a law in place that is reducing its flat income tax by 0.5 percentage points every time certain triggers are met. This law, which does not have a limitation on how low the rate can go, has already reduced the income tax from 5% to 4.5%, and will reduce the rate again to 4% in 2024.
Louisiana lawmakers reduced every single one of their income tax rates, taking the top rate down from 6% to 4.2%. They also put a trigger in place that will allow for additional rate reductions as certain revenue targets are met.
Arkansas Gov. Sarah Huckabee Sanders ran on making Arkansas a no income tax state, and the state recently enacted legislation that reduced the top rate from 4.9% to 4.7%. Governors and/or legislative leaders in Oklahoma, North Carolina, North Dakota and West Virginia are also eager to phase out their income taxes.
In addition to reducing the individual income tax, Missouri’s HB 816 would also reduce the corporate rate from 4% to 2%. Studies have shown that up to 70% of corporate taxes are borne by employees in the form of lower wages or consumers in the form of higher prices.
Cutting the corporate tax in half will allow employers across Missouri to invest additional resources in adding new jobs and instituting pay raises, and make Missouri a much more attractive state for businesses looking to expand. This will, in turn, import more jobs and increase wages for all Missouri residents.
HB 816 would be a huge, measurable victory for everyone in The Show-Me State. It would enable Missouri to better compete with states that do not impose individual or corporate taxes at all, and with the states in our region that are aggressively lowering these taxes, all while allowing taxpayers across the state to keep more of their own money.
Continuing to reduce the burden of taxes on the labor of all Missourians will truly grow our state and make it a better place to live, work and raise our families.
Tim Jones is the former Speaker of the Missouri House of Representatives, and Grover Norquist is President of Americans for Tax Reform.