Why Missouri Needs Tax Reform

State of Our State

Missouri only grows by 18 people a day.

Meanwhile, Tennessee is adding 76 people a day, and Texas is adding 380 people every day. [1]

Missouri has been losing wealth to other states.

Between 1995 and 2008, Missouri lost $1.5 billion in Net Adjusted Gross Income to other states. In that same period, no-income tax states Tennessee, Texas and Florida gained $6.6 billion, $15 billion, and $73 billion respectively. [2]

Missouri’s relative economic growth ranks 48th.

Missouri’s Real GDP Growth in the last decade ranked a dismal 48th, with comparable states like Tennessee achieving substantially better economic growth. [3]

[1] Current Population Survey Data on Geographic Mobility/Migration; time period 2005-2009. [2] IRS Tax Filer Database. [3] U.S. Bureau of Economic Analysis

 

“   Just catching up to the national average in growth would add $50 billion to Missouri’s gross state product, while joining the states with no income tax would add $100 billion to Missouri’s gross state product.

 

During the past 10 years, if Missouri had just caught up with the average of states with no income tax, the average Missouri resident’s income would be more than $12,000 higher.”

- Art Laffer
Rich States, Poor States 3rd Ed.

 

 

OUR STATE TAX STRUCTURE HURTS GDP, POPULATION & WEALTH PERFORMANCE

  • Missouri has dropped from 7th to the 18th most populous state in the nation since 1910, going from 16 Congressional seats in 1910 to only 8 in 2010. [1]
  • When we lose wealth, Missouri loses permanent tax revenue.
  • Without growth, we don’t keep or grow jobs.
[1] Missouri’s Population Trend Over the Last 100 Years, Eric Ostermeier, March 2, 2011

 

WHY DOES TAXING INDIVIDUAL INCOME HURT US MORE THAN OTHER MODES OF TAXATION?

  • Income is more mobile and harder to collect than local investment or consumption.
  • Reduces returns to those who produce and those who employ.
  • Creates huge swings in state revenues, raising more uncertainty for whose who depend on ourstate services.

REVENUE VOLATILITY

A Model for Growth

If Tennessee can do it…

How can we be sure that this plan will work for Missouri? Look no further than our neighbor, Tennessee.

Tennessee has never had an income tax, and their state general revenue relies mostly on a 7% sales tax. Unlike other no-income tax states like Texas and Florida, it’s hard to find many differences between Tennessee and Missouri. We have Branson, Tennessee has Dollywood. Tennessee has the Smokies while we have the Ozarks. We share access to the Mississippi River and both border eight other states. Tennessee’s experience makes us confident that it’s possible for a state like Missouri to survive and thrive without an income tax.

Tennessee shows us not only that it’s possible, but also that it’s an asset. Several decades ago, Tennessee was much smaller than Missouri in State GDP and population. But Tennessee was able to catch up – and pass – Missouri by accomplishing faster growth without an income tax.

Tennessee also shows us that forgoing state income tax revenue doesn’t mean that state services will suffer.

In fact, Tennessee has a larger budget, funds a broader state health care plan, and has higher average teacher pay than Missouri – just a few ways the no-income tax model has produced better results for Tennessee.

 

For more information, read ‘The Missouri Compromise‘ by Art Laffer.