Some Missouri lawmakers want to eliminate the state’s income tax and greatly expand sales taxes, pointing to states like Tennessee, Florida, & Texas as models. But those states have resources Missouri does not have, and except for the highest earners, taxpayers in those states pay higher portions of their incomes in state and local taxes than do Missourians. Moreover, when comparing economic indicators, Missouri is already doing as well as these states.
These States Aren’t Actually Low-Tax – Just Low-Tax for the Rich
States such as Tennessee, Florida, and Texas that do not levy an income tax are not low-tax for everyone. Instead they are only low-tax for the wealthy, while low-and-moderate income earners pay a higher share of their income in state and local taxes as compared to Missouri and most other states. That’s because most states replace lost income tax revenue by raising other taxes (usually sales & excise taxes) that are a much higher share of income for most families.
States without individual income tax rely more heavily than Missouri on regressive taxes, like sales and property taxes. These taxes create an upside-down tax structure, where low- and middle-income residents pay more than the wealthiest as a share of their income in state and local taxes. Shifting to a greatly expanded sales tax would make Missouri’s tax structure even more upside down than it already is. As seen in Tennessee, Florida and Texas, only the wealthiest pay less – while most Missourians would pay more under this scheme.
Comparisons to States That Do Not Levy an Income Tax Are Often Comparing Apples to Oranges.
Each state economy is driven by unique conditions that don’t always translate to Missouri.
While Texas has seen rapid growth in Gross Domestic Product (GDP) in recent years, the primary driver of that growth is the oil and gas industry. In fact, Texas is by far the leading producer of both oil and gas in the nation, an option not available to Missouri.
Texas produces 43% of oil and 28% of natural gas in the U.S. – by far the largest share in the nation.
By contrast, Missouri produces no oil and almost no natural gas.
Disneyworld is the world’s most visited theme park, and Orlando area theme parks see over 68 million visitors each year.
By contrast, Branson sees just 10 million visitors each year.
Great Smoky Mountain National Park is the most visited national park in the nation with 12.2M visitors each year.
By contrast, Gateway Arch National Park sees just 2.5M visitors each year.
Florida and Tennessee both rely heavily on tourism. This tourism drives growth and it also allows the states to tap into additional revenue streams, such as taxes that are levied primarily on out-of-state visitors.
Each year, Florida has 157 million out-of-state visitors and Tennessee has 114 million. But Missouri sees just 28 million – meaning any expansion of sales taxes would largely fall on Missouri residents.
Sustainable Economic Growth Is Driven By Real Improvements in the Lives of Everyday Missourians, Not Tax Cuts For Millionaires.
Over the past decade, Missouri has passed tax cuts that cost the state $3.8 billion each year. If tax cuts were the key to economic prosperity, Missouri would already be seeing the benefits. But real economic prosperity is complicated, and driven by a range of factors.
This means that there is no clear economic picture when comparing Missouri to states with income tax. In some areas, Missouri significantly outperforms states that do not levy an income tax – particularly those measures that more directly assess economic conditions for average residents. In other areas, Missouri’s economic indicators are similar to or underperform these other states – a reflection of the fact that these states each have unique economies and demographic compositions.
