RSMo §143.011(4)(1) represents the essence of Missouri’s income tax reduction trigger law. Passed in 2022, the law reduces the state’s income tax over time to a floor of 4.5%, assuming certain revenue targets are met. Importantly, the section states that “[n]o more than three reductions shall be made under this subsection.” In other words, when the tax cut triggers are all met, no further cuts below 4.5% can be made.
Why stop at 4.5%? As the state’s general revenue grows, shouldn’t tax rates be adjusted accordingly so that the total size of government doesn’t also grow? By eliminating the limit of three reductions to the income tax rate from the law, Missouri can set forth a fiscally responsible glide path to eliminating the income tax entirely, using current law to facilitate this autopilot tax reform. Letting taxes drop as revenues rise is an appropriate and efficient way of achieving this end.
We have talked at length and for years about how destructive income taxes are to growth and why they should be phased out and ended in Missouri. Accelerating that stepdown is worthwhile, but not stopping that stepdown is just as important, given the current law. Policymakers should remove the floor and let the individual income tax rate continue to fall if government revenue keeps rising.
