Missouri governor wants to eliminate income taxes. Some fear KS-like budget crisis
AI-generated summary reviewed by our newsroom.
- Governor Kehoe proposes eliminating Missouri income tax; plan lacks specifics.
- Eliminating income tax would cut about $9B in revenue and force tradeoffs.
- Critics warn the move could mirror Kansas, raising sales taxes or slashing services.
Missouri Gov. Mike Kehoe has floated a plan to eliminate the state’s income tax, an extraordinary move that would drastically change how the state funds operations and services.
Kehoe, a Republican who promoted the idea on the campaign trail last year, has not yet unveiled any specifics. But comments from the governor’s office and top GOP leaders suggest the issue will be at the forefront of the upcoming legislative session that starts in January.
“Governor Kehoe believes eliminating Missouri’s income tax is critical to ensuring that Missouri is a competitive and thriving state for businesses and families,” Kehoe spokesperson Gabby Picard said in a statement to The Star on Monday.
The stark acknowledgment has drawn parallels to neighboring Kansas, which experienced a budget disaster roughly a decade ago under a series of sweeping tax cuts that were eventually rolled back.
Missouri collects roughly $9 billion in individual income taxes each year, making up nearly two-thirds of the state’s general revenue.
Kehoe’s push to eliminate the income tax — which could come gradually or all at once — would likely force Missouri officials to confront difficult choices about the role government will play in the state’s future.
If the plan moves forward, Missouri would join just nine other U.S. states that do not collect income taxes. The change would likely require Missouri lawmakers to slash spending dramatically, significantly raise other taxes — such as sales taxes — or pursue a combination of the two.
The effort also comes as Missouri officials are already predicting a major budget shortfall after years of being propped up by federal pandemic aid. Facing a more grim financial reality, Kehoe this summer slashed $511 million in budget projects approved by state lawmakers.
Kehoe’s office did not provide specifics about how the governor planned to pursue his income tax cut on Monday. His spokesperson emphasized that Kehoe has long supported the idea and has been working on the plan since his first State of the State address in January.
“Since then, Governor Kehoe and his team have been working regularly with the Missouri Department of Revenue and economic advisors on a responsible and comprehensive tax plan, with plans to engage stakeholders very soon,” Picard said.
“The Governor,” Picard said, “looks forward to sharing more soon about this plan that will keep more money in Missourians’ pockets and attract economic investment to the state.”
But the remarkable effort is already facing warnings from Democrats and budget analysts, who fear the cut would be disastrous and further burden low-income residents in Missouri.
Traci Gleason, a spokesperson for the Missouri Budget Project, said if the governor’s plan were to replace income taxes with an increase in sales taxes, the effort would dramatically increase costs for residents.
“For most Missourians, income tax is not the major share of the taxes that they pay,” Gleason said. “And eliminating the income tax will be a boon for wealthier folks, but will increase taxes for most of us.”
Gleason shared with The Star a report conducted by her organization that analyzed the idea. The analysis suggested that Missouri’s current sales tax rate of 3% would need to increase to 11.5% to make up for lost revenue from eliminating the income tax.
However, it’s unclear whether Kehoe’s plan would include a push to raise sales taxes. Other, more conservative-leaning financial policy groups, such as the Show-Me Institute, have sought to phase out the income tax.
The think tank’s 2025 blueprint called on Missouri officials to sunset the state income tax and local earnings taxes to “make Missouri a top destination for those in search of economic opportunity and those responsible for creating it.”
Critics look to Kansas
Some critics have pointed directly at Kansas as a cautionary tale.
Between 2012 and 2013, then-Kansas Gov. Sam Brownback, a Republican, signed a package of tax cuts intended to stimulate the state’s economy. The cuts, including to the state’s income tax rates, resulted in significant budget shortfalls by 2014 and an increase in sales taxes in 2015.
Extended anger over the controversy led to the election of a wave of moderate Republican and Democratic lawmakers the next year and a 2017 repeal of Brownback’s signature tax cuts.
In Missouri, House Minority Leader Ashley Aune, a Kansas City Democrat, called the proposed income tax cut in her state “deeply, deeply concerning” in an interview.
While Republicans might try to gradually phase out the income tax, “that just means we are on a trajectory of a slow descent into Brownback territory,” Aune said.
Complicating matters in Missouri — as opposed to Kansas — is an amendment to the Missouri Constitution, called the Hancock Amendment, that largely bars lawmakers from raising taxes above a certain threshold without voter approval.
That provision likely would prevent lawmakers from raising taxes to make up for a budget shortfall caused by an income tax cut “if and when this disastrous policy decimates our revenues,” Aune said.
Gleason, with the Missouri Budget Project, echoed similar concerns. However, she added that Missouri was already on a similar path to what happened in Kansas, pointing to a wave of recent tax cuts enacted by state lawmakers.
The Kansas tax cuts “went into effect, they saw it and it was a stark difference that people could see,” Gleason said. “In Missouri, it’s sort of been happening slowly over time and it becomes the new reality for everybody.”
There are also similar players in both the Kansas tax plan and Missouri’s effort.
On his path to the governor’s office, Kehoe’s campaign touted his work with economist Art Laffer, saying they were working on “a plan to lower the tax burden on Missourians.”
Laffer helped advise Brownback on the creation of the Kansas tax plan. More recently, Laffer in 2022 met with Kehoe’s predecessor, Republican Gov. Mike Parson, who signed into law an income tax cut that sought to lower the rate to 4.5% once fully implemented.
Kehoe’s spokesperson did not respond to a question about whether Kehoe was still working with Laffer on his income tax cut plan.
Republicans pursue tax cuts
Despite the criticism, Missouri Republicans have for years pursued cuts to the state income tax. But Kehoe’s plan, which could be unveiled after bill filing begins Dec. 1, will likely be the state’s most expansive attempt to eliminate it altogether.
House Speaker Jonathan Patterson, a Lee’s Summit Republican, confirmed in an interview that Republican lawmakers would look into an income tax cut starting next month, ahead of the upcoming session. However, Patterson was short on details of what that might look like.
“One of the things we hear from our constituents is about affordability and there’s nothing that we could do that would be better than putting more money back into their pockets,” Patterson said.
Patterson also acknowledged concerns about Kansas, saying that Missouri’s Hancock Amendment meant that Missouri lawmakers needed to be careful about how they handled any type of cut.
“If we have what happened in Kansas, then that would be a disaster,” Patterson said. “We really have to be thoughtful about this.”
In Missouri’s other legislative chamber, Republican senators have already met with Kehoe about potentially eliminating the income tax during their annual retreat earlier this month, said Sen. Lincoln Hough, a Springfield Republican.
Hough, who was previously in charge of the Senate’s powerful budget-writing committee, said he wanted to see Kehoe’s plan before he weighed in on it. But he acknowledged that the revenue generated from income taxes would be “a pretty big number to offset.”
