Republicans’ Plan for Zero State Income Tax Could Be ‘Devastating’, Experts Warn

In 2012, Kansas eliminated its state income tax, a move that proponents claimed would boost the economy by attracting new businesses and putting more money in residents’ pockets. However, experts warn that this approach has consistently led to devastating consequences, leaving lower- and middle-income residents struggling to make ends meet.

Hannah Rejali, who witnessed firsthand the elimination of income taxes in Kansas, recalls the failed experiment: “You say ‘Brownback’ to anyone on the Kansas side, and they shudder.” The elimination of income taxes led to a $900m budget shortfall, forcing at least eight school districts to end their academic year early. Critics argue that Missouri’s proposed constitutional amendment, which promises to tie the elimination of income taxes to revenue growth, is a hollow promise.

In reality, eliminating an income tax necessitates tradeoffs, which often fall on existing residents. In Kansas, five years after Brownback started his “march to zero,” the Republican-led legislature voted to roll back most of the tax cuts, overcoming the governor’s veto. The notion that eliminating state income taxes attracts new businesses is also a myth that refuses to die.

Proponents point to states like Florida and Texas as models for success, but skeptics note that these states have unique characteristics – such as their climate and beaches – that cannot be replicated elsewhere. Even if Missouri eliminates its income tax, it’s unlikely to become a magnet for businesses and residents.

The evidence suggests that eliminating state income taxes benefits only the wealthy, while leaving lower- and middle-income residents vulnerable to increased sales taxes. In Kansas, this led to a situation where people making between $49,000 and $80,000 paid an average of $535 more annually in taxes when the state increased its sales tax to recoup revenue lost from income tax cuts.

The proponents’ argument that they can simply close loopholes or reduce the state income tax without imposing new sales taxes is disingenuous. The Missouri legislature already has the power to reduce the state income tax, but it cannot impose new sales taxes because of a 2016 voter-approved amendment prohibiting such measures. If the state does increase its sales tax to recoup revenue lost from income tax cuts, lower- and middle-income residents will bear the brunt.

Missouri’s proposed amendment is not just about eliminating income taxes; it’s also about opening up the constitution to allow for the expansion of sales taxes. As Amy Blouin, president and CEO of the Missouri Budget Project, noted, “The only reason for them to have this amendment is to allow for the sales tax to be greatly expanded.” This would disproportionately affect lower- and middle-income residents, who spend a bigger share of their earnings on necessities.

The pattern of devastation is clear: eliminating state income taxes has consistently led to increased poverty, decreased funding for essential services, and reduced economic mobility. It’s time for Missouri lawmakers to learn from the mistakes of Kansas and other states that have followed this path. Instead of chasing after tax cuts, they should focus on creating a fair and progressive tax system that benefits all residents.

The proposed amendment is set to be decided by voters in August or November. As we approach this critical moment, it’s essential to remember the lessons of history and the devastating consequences of eliminating state income taxes. Will Missouri follow in Kansas’s footsteps, or will its lawmakers take a different path? The choice is theirs – but the fate of lower- and middle-income residents hangs precariously in the balance.