Republicans’ plan for zero state income tax could be ‘devastating’, experts warn | Missouri

Hannah Rejali, 34, lived through the failed so-called “Kansas Experiment” in the 2010s, when the Republican governor cut the state’s income tax to give its economy an “adrenaline shot” but instead left the state facing a $900 million budget deficit.

This meant that in 2015, for example, at least eight school districts ended the academic year early.

“You say [former Kansas governor Sam] I tell everyone on the Kansas side about Brownback and they get chills,” Rejali said.

Rejali now lives next door in Missouri, where Republicans now want to eliminate the state income tax as well. The mother of four worries this will lead to a reduction in government funding for schools.

“From a public education standpoint, eliminating the income tax would be pretty devastating,” said Rejali, who lives in Kansas City and co-owns a marketing agency.

Missouri became the first state in more than a century where the state legislature asked voters whether to repeal the tax. Associated Press reports. But the moves also add to other Republican-led states across the country that have recently passed legislation to phase out income taxes.

While lawyers say this Proposed Missouri The constitutional amendment, which the government would likely pair with a sales tax expansion, would attract new businesses and put extra money in the pockets of all residents; Critics argue it would hurt low- and middle-income residents and help only the wealthy.

“The argument is made that high-income people will expand their businesses or create jobs” and “the benefits will be passed on to everyone else,” said Carl Davis, research director at the Institute on Taxation and Economic Policy, a left-leaning think tank. “The truth is, this has been done countless times nationally and in many states, and it doesn’t work that way.”

Besides Missouri lawmakers Georgia, South Carolina And West Virginia he has also recently passed bills that would reduce state income taxes, and some Republicans have pushed for their eventual elimination.

Americans for Prosperity, a right-wing advocacy group funded by the billionaire Koch brothers, is one of them. leading groups is pushing lawmakers across the country to eliminate state revenue taxes.

Rex Sinquefield, a St. Louis investor, also backed a group pushing for a Kansas income tax cut in 2012. Wall Street Magazine He said so many companies would relocate that “there would be a cloud of dust on the Missouri-Kansas border.”

He later donated millions to Republican Mike Kehoe’s successful 2024 campaign for governor of Missouri.

“Phasing out the income tax will make Missouri more competitive, attract jobs and investment, and allow workers to keep more of what they earned from the start,” Kehoe wrote. a column We support the proposed amendment, which voters will decide on in August or November.

Advocates of eliminating state income taxes quote frequently The economic success of states such as Florida and Texas, which are among nine US states without such taxes.

Dennis Ganahl, founder of Mo Tax Relief Now, said his son told him he was moving to Florida or Tennessee because there was no income tax.

“I said, ‘Well, stay in Missouri. I’ll give you zero income taxes,'” said Ganahl. “So he moved here, you know? There are other people in their family who have the same story.”

Skeptics say even if Missouri repeals its income tax, no more people will move there.

“You can’t replicate Florida’s climate and beaches in Missouri,” Davis said. “We’re not necessarily seeing people flocking to South Dakota, for example. There’s no income tax in South Dakota either.”

Eliminating the income tax doesn’t always benefit existing residents either. In Kansas, five years after Brownback began his “march to zero,” the Republican-led Kansas legislature voted to roll back most of the tax cuts, overriding the governor’s veto.

Unlike what Brownback and Sinquefield promised, “the basic truth here is that state income tax cuts require trade-offs,” Davis said.

But proponents of the Missouri measure argue their approach would prevent the state from repeating Kansas’ mistakes because it depends on “revenue growth.”

“They’re not going to suddenly start saying, ‘Okay, no one needs to pay taxes,'” Ganahl said. “What they’re going to start doing is making sure there’s revenue so that the income tax is gradually and progressively lower.”

Ganahl played down the idea that the state would raise sales taxes. Instead, the amendment simply “opens up the constitution so they can change the way Missouri raises its revenue,” he said.

Instead, “you can close the gaps,” said Ganahl.

But the legislature can already lower the state income tax but not impose new sales taxes because Missouri voters in 2016 approved an amendment banning the state from adding sales taxes on services or transactions.

“The only reason they have this amendment is to allow for a massive expansion of the sales tax; otherwise, they don’t need it,” said Amy Blouin, president and CEO of the Missouri Budget Project, which opposes the amendment.

If the state raises sales taxes, Davis said, it would hurt low- and middle-income residents who spend a larger share of their earnings and currently pay less in income taxes, so the reduction would make a negligible difference.

If the state raises its sales tax enough to make up for the revenue lost due to the cut in income taxes, those making between $49,000 and $80,000 would pay an average of $535 more per year. Institute of Taxation analysis.

“Most seniors don’t pay income taxes, so the expanded sales tax would be an additional cost,” said Republican Missouri state Sen. Joe Nicola, who opposes the proposed change.

Evidence that reducing or eliminating state income taxes attracts new businesses is also mixed.

“Marginal tax rates generally have no effect on employment and have statistically significant but economically small effects on the rate of firm formation,” according to a 2015 report. National Tax Magazine the report stated.

Instead, when people in the top income brackets see their taxes cut, most of the savings are invested in the stock market, Davis said.

To address concerns about schools losing money, the ballot measure asks whether the constitution should be amended “to protect local funding for public schools and other purposes.”

But the amendment only prohibits a “political subdivision” from adjusting “local tax rates in a manner that would result in any reduction in the funding of any public school.”

It doesn’t say anything about state education financing anyway. running out of money.

“The ballot summary is very misleading,” Blouin said.

While Ganahl said the state has learned from what happened in Kansas, there is a more recent cautionary tale that even a slower approach to reducing the state’s income taxes could lead to a backlash from residents.

State government in North Carolina gradually reduced There have been income taxes since 2012. This did not protect public education.

State funding per student dropped from $9,053 in 2003 to $7,869 in 2025. NC Budget and Tax Center. It is also the only state where teacher salaries decreased between 2024 and 2025. National Education Association reports. Last week, thousands of teachers and supporters marched in the state capital to call for increased teacher salaries, more funding for schools and more taxes on corporations. News and Observer reported.

The phased approach allows the state to avoid a “singular moment of crisis,” Davis said.

Instead, “it’s basically the equivalent of a frog in boiling water,” Davis said. “You lower the income tax rate and the quality of services gradually declines, but in a less noticeable or flashy way than what we see in Kansas.”