Missouri lawmaker wants to nix state income tax

Missouri might join the no-income-tax club if one lawmaker gets his way.

In a move that’s turning heads in Jefferson City, Rep. Bishop Davidson, a Republican from Republic, is rolling out an ambitious blueprint to kiss the state income tax goodbye. His House Joint Resolution 1 for 2025 isn’t just another tax proposal – it’s asking Missouri voters to weigh in on gradually phasing out state income taxes entirely.

“We’re not talking about eliminating the revenue stream overnight,” Davidson explained last week. “This is a methodical approach that ensures we maintain essential services while working toward a more competitive tax environment for Missouri.”

The nuts and bolts? Starting in 2027, a newly created “Tax Reform Fund” would start collecting extra cash – anything over $1 million from income tax revenue. Once that piggy bank hits $120 million, it triggers the first baby step: a tax cut of 0.1%. From there, the cuts would keep coming as the fund grows.

Traci Gleason with the non-partisan budget analysis group Missouri Budget Project, is not convinced.

“It’s easy to think, ‘I see these line items on my paycheck,’ but we don’t always connect it to the public services that we all rely on every day, from public schools, the teachers in our classrooms, the busses to get the kids there, our roads, our infrastructure, healthcare, social services, making sure kids in foster care are taken care of, etc.”

Talk about timing – this proposal lands just as Missouri’s top tax rate is set to drop to 4.7% in January 2025, marking the state’s fifth tax trim in recent years. Right now, Missourians are paying anywhere from 2% to 4.95% in state income taxes.

But here’s the catch: Missouri’s revenue collection is already down 4.8% this fiscal year, sliding from $1.42 billion to $1.35 billion. The state’s not exactly swimming in cash – it’s already near the bottom of the barrel nationally in both collecting and spending per resident.

If this plan makes it through both legislative chambers and gets a thumbs-up from voters, it would mean some serious soul-searching about funding vital services – we’re talking schools, hospitals, roads, and police departments.

Studies have shown that eliminating personal income taxes doesn’t always lead to better economic conditions for the state’s residents. A Bankrate.com study found that the revenue is still generated by the state but through hidden fees, higher local property taxes, more expensive car tags and higher retail sales taxes.

The political drama kicks off when the 103rd General Assembly convenes on January 8, 2025. Stay tuned – this could be a game-changer for Missouri’s financial future.

–Dwight Widaman | Metro Voice