Missouri policymakers continue to propose the elimination of Missouri’s individual income tax. But evidence from states without income taxes shows that these states are only low tax for the highest earners. Instead, they rely heavily on sales & excise taxes that hit low and middle-income folks hard while giving large tax breaks to the wealthy.
Most Missourians pay the majority of their state and local taxes in sales & property taxes – not income taxes.
This means that large state level income tax cuts primarily benefit the highest earners – particularly when those cuts are paired with increases in other taxes (such as sales or property taxes) or cuts to critical services.
States that do not levy an income tax are not low-tax for everyone.
Instead, they are only low tax for the wealthy. In fact, many living in those states pay more in taxes than they would in others. That’s because states without income taxes fund their budgets through sources like sales & excise taxes, which are a much higher share of income for most families.
Most states with no income tax rely heavily on state sales & property taxes to fill the gap in revenue.
Nearly all states without an income tax fill the revenue gap with unusually high sales, excise, or property tax collections. The few exceptions are states with revenue options that are not available to Missouri. For instance, Alaska, Wyoming, and Texas tax the extraction of natural resources such as oil and gas – resources Missouri does not have – and New Hampshire levies unusually high taxes on corporations and other businesses.
