A Tale of Two States

From varied climates to quirky accents, there’s a world of difference across the 50 states. While many of these differences are accidents of history and geography, choices by politicians often make or break a state’s future. California, which has a top income tax rate of 13.3 percent, is one stark example of tax policy gone wrong. A proposed wealth tax would make the state an even higher cost locale, levying a one-time, 5 percent tax on the approximately 200 billionaires in the state. Meanwhile, Missouri appears poised to go in the opposite direction and phase out the state’s income tax. Policymakers in the Golden State should take a page or two from Missouri Governor Mike Kehoe (R) and give taxpayers a hard-earned break.

Introduced in the Missouri House of Representatives, HJR 174 proposes a constitutional amendment for Missouri voters that, if passed, would phase out the income tax rate—which currently tops out at 4.7 percent on taxable income over $9,191. Missouri has already made critical strides in reforming its tax code. The top income tax rate has been lowered to 4.7 percent from 6 percent, and the state now allows individuals to deduct 100 percent of federal capital-gains taxes. These changes are laudable, but Missouri can do far more to give families a well-deserved break and bring businesses and opportunities into the state.

Repealing the state income tax would strengthen Missouri’s ability to attract and retain both individuals and businesses. States without income taxes consistently rank higher in measures of inbound migration, job growth, and business formation. A tax structure that does not penalize work, savings, or investment sends a clear signal that the state welcomes economic activity and long-term commitment. Most of Missouri’s eight neighboring states have taxes lower than the Show Me State, but an income tax phaseout can make the state more competitive as a more attractive destination for families and businesses.

Compare this approach to California’s onerous tax policies, which have residents fleeing the state. As Fox News’ Amanda Macias notes, “Between 2012 and 2022, California recorded a net loss of more than 361,000 residents to Texas [which has no income tax], a shift that carried roughly $21 billion in taxable income with it.” Missouri can share in Texas’ migration gains, but only if it moves decisively to end its income tax.

Repeal would provide broad-based relief, particularly to middle- and lower-income households who feel the impact of income taxes most acutely. Allowing residents to keep more of what they earn supports family savings, consumer spending, and overall economic resilience. Hunter Hamberlin, the Taxpayers Protection Alliance’s Director of State Affairs, is traveling to Jefferson City this week to testify in favor of HJR 174 and highlight tax reform’s many benefits for taxpayers in the Show Me State. Missouri should pursue a better approach to tax policy that doesn’t leave residents footing the bill for wasteful spending and failed promises.