EDITOR:
The economic theory is: If you cut income tax rates, then actual tax dollars collected will increase because private spending and investments will increase causing an economic upturn.
Based on that concept, Kansas legislators and Governor Brownback passed major cuts in income tax rates back in 2012. However, taxes collected from 2013 to 2017 reduced significantly causing funding issues at the state and local level. Finally in 2017, the Kansas legislature raised income tax rates to balance the budget.
Academics like to tout the Kansas failure as evidence that tax cuts do not stimulate the economy. They are wrong. But the cuts have to be done in the proper way. Economics is a complicated issue with a lot of variables.
Since 2012, 25 other states have lowered income tax rates with a resulting increase in tax revenue to their states.
Four states and Washington D.C. raised income tax rates since 2012. In all five cases their economic growth was lower than states where tax rates were cut.
On the federal level, there is a century of success in lowering income tax rates with a result of improving the economy and increased tax income. In the 1920s Treasury Secretary Andrew Mellon proposed lowering income tax rates to boost investment and stimulate the economy. Top rates had jumped from 7% in 1913 to 77% in 1917.
In 1924, Mellon noted: “The history of taxation shows that taxes which are inherently excessive are not paid. The high rates inevitably put pressure upon the taxpayer to withdraw his capital from productive business.” He received strong support from President Coolidge, who argued that “the wise and correct course to follow in taxation and all other economic legislation is not to destroy those who have already secured success but to create conditions under which every one will have a better chance to be successful.” (cato.org)
The booming 1920s were in part due to the Mellon tax cuts.
JFK created similar cuts in 1963, that caused a boom in 1964. Ronald Reagan in 1981, George W Bush in 2003, and Donald Trump in 2017 all passed cuts in income tax rates that helped stimulate the economy.
What went wrong in Kansas? The original 2012 package proposed cutting taxes and reducing state spending. Lobbyist and special interests objected – so only the tax cuts passed. They were large and immediate. State income fell far short of commitments to public schools, infrastructure and local matching projects. Less income ultimately caused budget cuts and that led to increased sales and property taxes.
Missouri legislators and Governor Kehoe are debating eliminating personal income tax this year. The plan must include cutting state level spending in similar amounts to initial reductions in state revenue or Missouri will suffer the same disastrous results as Kansas.
One bad proposal is to replace state income tax with a higher sales tax rate. This will have a negative impact on the Missouri economy and state income. It is estimated that some areas of Missouri would have a 19% combined state and local sales tax rate if income tax is replaced by sales tax with no cuts in spending.
Sales tax is regressive and hurts our lowest income residents. Everyone pays sales tax, while those earning less pay less income tax.
Replacing income tax with a high sales tax, will be a boon for our border states as Missouri residents will simply go across the border to save thousands of dollars in sales tax.
Missouri income tax rate for 2026 is a flat 4.7% but will decrease when overall state income increases. 4% is the target rate under current law.
There is a responsible path to eliminate the state income tax. Simply reduce state spending to pre-Covid levels.
The Missouri legislature goes back into session Wednesday, Jan. 7 through Friday, May 15, 2026.
Find your legislators and contact them at house.mo.gove or senate.mo.gov
--Paul Hamby
Maysville
