Missouri Can Eliminate Its Income Tax: Sustainable Budget Project

But Only if the Legislature Controls Government Spending

Hello Friends,

Missouri can eliminate its individual income tax. The real obstacle is not a lack of revenue. It is a government that has grown too much, as with most governments.

That distinction matters as Missouri voters consider a constitutional amendment to phase out the income tax as revenues rise. Supporters are right that ending the income tax⁠ would let Missourians keep more of what they earn, reward work and investment, and make the state more competitive.

But the current political fight over the proposal⁠ has focused heavily on how government collects money. The more important question is how much government should spend. Income tax elimination is achievable, but only if lawmakers stop spending the surpluses needed to accomplish it.

Missouri Has Room to Reduce Spending

The Sustainable Budget Project for Missouri⁠, published by Americans for Tax Reform, measures state spending against population growth plus inflation.

This approach does more than balance spreadsheets. It helps prevent government from taking a steadily larger role in our lives.

When spending grows faster than changes in people and wage growth, government claims more resources, makes more decisions, and leaves families and businesses with less freedom to make their own choices.

Chart 1: Missouri Budget Comparison

Missouri stayed relatively close to a sustainable path before 2021. Then spending surged.

By 2025, the state-funds budget was about $1.6 billion above the benchmark, while the all-funds budget was roughly $9.5 billion higher. Cumulative excess state funds was over by $9 billion and all-funds spending exceeded $42 billion over the decade. These excesses mean income taxes could be lower by $9 billion with sustainable spending

That excess shows Missouri has plenty of room to reduce spending before simply limiting future growth.

Lawmakers should review programs added or expanded during the federal spending surge, eliminate waste and duplication, and return the budget toward its sustainable path. Once there, annual growth should remain capped at population growth plus inflation.

The proper sequence is to reduce the excess first, restrain growth thereafter, and use the resulting surpluses to eliminate the income tax.

The Spending Surge Was a Choice

Chart 2: Average Annual Budget Growth

From 2016 through 2020, Missouri’s state-funded spending grew only 1.2% annually, below the 1.4% increase in population growth plus inflation. That record proves restraint is possible.

From 2021 through 2025, state funds grew 6.2% annually and all funds jumped 8.7%, while the sustainable rate was 3.9%. Missouri did not suddenly gain twice as many residents or responsibilities. Lawmakers spent more because federal aid and strong revenues made more money available.

Temporary dollars became larger budgets. Larger budgets created new constituencies. Now those commitments compete with tax relief. Missouri can reverse that cycle.

Missouri Needs Faster Economic Growth

Missouri has important advantages, including relatively competitive taxes and a central location. But it remains only 22nd in Economic Freedom of North America and 24th in economic outlook. Its real private-sector GDP growth also trails many faster-growing states.

A Show-Me Institute productivity study⁠ found Missouri ranked 44th in economic growth and total-factor productivity growth over the period studied. The analysis estimates that eliminating the income tax could increase annual real GDP growth by 0.25 to 0.5 percentage points and raise worker incomes substantially over time.

That is why this debate matters.

The objective is not merely to move taxes around. It is to reduce government’s claim on productive activity so people have stronger incentives to work, save, invest, and build businesses.

Other States Show What Is Possible

Oklahoma kept cumulative state-funded spending about $9.7 billion below its sustainable benchmark while ranking near the top tier in economic freedom and outlook.

Iowa also combined spending restraint with repeated income-tax reductions. Its lawmakers created surpluses first and converted them into durable tax relief.

Tennessee demonstrates the long-term advantage of having no individual income tax. It ranks second in economic freedom and economic outlook and substantially outpaced Missouri in private-sector growth. Yet Tennessee’s recent spending increases also show that even a good tax code must be protected by continued discipline.

Kansas provides the warning. Its state-funded spending exceeded the sustainable path by more than $20 billion during the decade, consuming resources that otherwise could support deeper tax reform.

Missouri Can Finish the Job

Chart 3: FY2027 Budget Limits

The Sustainable Budget limit would still allow Missouri’s state-funded budget to rise from $24.17 billion to $25.01 billion next year.

But because spending already sits above the long-run benchmark, lawmakers should aim higher than merely slowing the increase. They should identify real reductions, restore the budget to a responsible level, and then restrain future growth.

Missouri has taken a major step toward ending its income tax⁠. Now voters and lawmakers should insist on the spending reforms needed to complete it.

Reduce excess spending. Cap future growth. Dedicate surpluses to permanent income-tax relief.

Missouri can eliminate the income tax and leave families with more control over their money and their lives.

Let People Prosper,

Vance Ginn, Ph.D.

President, Ginn Economic Consulting