By Tim Jones
Why Missouri should look to low and no income tax states to experience expansive economic growth
In the hilarious cult classic, Talladega Nights, the film’s lovable screwball hero, race car champion Ricky Bobby, prophetically and sagely noted that “Winners win!” This obvious statement does suggest a deeper meaning when one begins to ponder the definitional depths of what it really means to be a winner and what is meant by “winning”. The impact of this Zen like statement has significant meaning for the lives of every day Americans and their prospects for jobs and opportunity in the various states largely dependent on 50 different approaches to state income tax policies.
According to the US Census Bureau, 4 of the 10 states that experienced the best percentage population growth from 2017-2018 had no state income tax, including Nevada, Florida, Texas, and Washington. Of all 50 states, Florida had the highest level of net domestic migration last year, gaining 132,502 people from other states. The growth and success of these low and no income tax states is solid evidence that winner states truly do keep on winning.
Some may say that people move to Florida for the sunny weather, the beaches, or the sunsets. While these are certainly perks, many people move to Florida for the long-term financial savings. They recognize that Florida does not swipe a portion of your paycheck every week but does manage to fully fund important public services like schools, roads, bridges, and healthcare – all while delivering a $223 million budget surplus in 2019 thanks to higher-than-expected revenues.
While people are rapidly moving to low-income states like Florida, other states like California continue to see their residents leave in droves. The Wall Street Journal notes that “Since 2010, a net 710,000 people have left California for other states.” People leave these loser states because they recognize how much further their dollar can go in places like Florida, Nevada, Texas, and Washington. Not only do these states not assess an income tax, but their fiscal conditions are much better than their high-tax counterparts according to a 50-state ranking by the nonpartisan Mercatus Center at George Mason University.
The Mercatus Center found that the bottom five states in terms of fiscal solvency were Illinois, Connecticut, New Jersey, Massachusetts, and Kentucky. Every single one of these states, with the exception of Kentucky, are high-tax states. The top-five states for fiscal solvency were Nebraska, South Dakota, Tennessee, Florida, and Oklahoma. Three of these states (South Dakota, Tennessee, and Florida) do not tax income.
It is no coincidence that the most fiscally irresponsible states in our country are the ones taxing income at the highest rates. These states drive taxpayers away by forcing them to forfeit significant portions of their paychecks. The result is a shrinking taxpayer base that bears the brunt of increasing costs like healthcare, pensions, and infrastructure. Fiscally-sound states, however, recognize that zero/low income tax policies draw new residents in from other states and naturally increase revenues as a result.
Missouri would be wise to recognize the winning ways of these winner states, especially as we see neighboring states slash their income taxes in an effort to attract more workers and entrepreneurs for themselves. As more states seek to replicate the successful low and no income tax policies that have created economic growth, prosperity and winning in states across the country, Missouri should look to do the same.
Tim Jones is a former Speaker of the House who served in the General Assembly from 2007 to 2015.