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By Tim Jones and Grover Norquist
Thanks to the leadership of Governor Mike Parson and Republicans in the General Assembly, Missouri taxpayers are now benefitting from the largest tax cut in state history. This is a huge win for all residents of the Show Me State. Making this great news even better, many Republicans want to build on this accomplishment by delivering additional permanent tax cuts.
Missouri Republicans used the 2022 legislative session to deliver a much-needed income tax cut package. On January 1, 2023, this package reduced Missouri’s top individual income tax rate – which applies to most Missouri income taxpayers and is the part of the individual income tax that is used to make decisions about investment – from 5.2 percent to 4.95 percent. It also allows for this rate to be reduced in the future – as low as 4.5 percent – as certain triggers are met.
Once fully implemented, the 2022 tax cut package will leave hundreds of millions of dollars in the pockets of individual taxpayers, families, and small businesses – which pay their taxes on the personal side of the code – every year. It will also help Missouri compete for investment in the economy of tomorrow.
Over the last decade, millions of people and jobs have moved out of high-tax states and into states that impose low- and no-income taxes. The flexibility to work remotely is amplifying this trend. To compete for this investment, a growing movement of states are working to reduce and phase out their income taxes.
There are currently eight states that do not impose individual income taxes of any kind: Texas, Florida, Tennessee, Alaska, Nevada, South Dakota, Washington, and Wyoming. New Hampshire, which does not tax wage income, will become the ninth “no income tax” state as soon as it completes a 5-year phase-out of its tax on interest and dividends income.
To compete with these states for new jobs, higher wages, and better opportunities, a growing movement of lawmakers are working to make their state the tenth to appear on the “no income tax” list. Thanks to legislation that was enacted by Governor Doug Ducey, Arizona now has a flat income tax of 2.5 percent. Republicans in the Arizona legislature have made clear that this is “step one” on the path to phasing out the state income tax completely.
Under the leadership of Governors Kim Reynolds and Tate Reeves, Iowa and Mississippi will have flat income tax rates of 3.9 percent and 4 percent by 2026. Republican lawmakers in both states have also announced that these historic tax cuts were the first step towards eliminating their income taxes.
Kentucky now has a law in place that is reducing its flat income tax by 0.5 percentage points every time certain triggers are met. This law does not have a floor, or limitation on how low the rate can go, so these reductions will occur until the income tax hits zero. This law has already reduced Kentucky’s income tax from 5 percent to 4.5 percent, and it is estimated to make Kentucky a no-income-tax state in roughly a decade.
In addition to lawmakers in those states, lawmakers in Arkansas, Louisiana, Idaho, and several other states have reduced their state income tax burdens in some capacity over the last two years and intend to reduce them even more. Gov. Sarah Huckabee Sanders ran on making Arkansas a no-income-tax state.
Rather than sitting back and allowing Missouri to fall behind, Gov. Parson and a super-majority of pro-taxpayer legislators, such as Senators Rick Brattin, Mary Elizabeth Coleman, Bill Eigel, Denny Hoskins, Andrew Koenig, Mike Moon, Nick Schroer, and Curtis Trent along with Speaker Dean Plocher, Budget Chairman Cody Smith, Representatives Ben Baker, Phil Christofanelli, Dirk Deaton, Hannah Kelly, Tony Lovasco, Jim Murphy, Doug Richey, Alex Riley, Dan Stacy, and Richard West, and so many others, are committed to making sure Missouri taxpayers receive another permanent income tax cut.
Reducing and ultimately phasing out the state income tax is a win for all residents of Missouri. It will enable Missouri to better compete with the “no income tax” states for businesses that are looking to expand, investors who are looking for growing economies, and families who are looking for greater opportunities. This growth will bring new jobs, more families, and higher wages to the state.
It will allow small businesses to grow and invest more resources in their business operations and employees. And most importantly, it will provide taxpayers with much-needed relief from continuing crushing inflation and historic high gas prices.
Tim Jones is the former Speaker of the Missouri House of Representatives and Grover Norquist is President of Americans for Tax Reform.