In The News
Last week, Missouri voters overwhelmingly rejected a proposal to eliminate their state income tax. The vote was 83.32% to 16.68%.
So what should Utah and other states looking to reduce or eliminate income taxes learn from Missouri?
Here’s My Take
The lesson from Missouri isn’t that states should stop cutting income taxes. It’s that voters want a clear roadmap for phasing them out, and clarity about the transition would look like.
A closer look at Amendment 5 shows why. The proposal would have required Missouri to phase out its individual income tax, but it also would have weakened a constitutional restriction on taxing services that voters approved in 2016.
In other words, a somewhat nebulous plan to phase out the income tax that involves extending sales taxes to previously untaxed services is a tough sell.
Missouri’s rejection of an income-tax phaseout is also something of a trend breaker. North Carolina enacted a full phaseout of its corporate income tax in 2021, reaching zero by 2030. Kentucky followed in 2022 with a plan to phase out its individual income tax, with Mississippi, Oklahoma, and South Carolina adopting similar plans since.
In Closing
There’s nothing in the water in Missouri that makes its voters uniquely fond of income taxes. More likely, the proposition itself was unclear and short on detail.
States working to reduce or ultimately phase out their income taxes shouldn’t read Missouri as a reason to reverse course. Utah has steadily lowered its income tax rate in recent years, and Missouri’s vote shouldn’t change that trajectory.
