by Michael Rathbone
Show-Me Institute
January 30, 2014
Missouri has slipped behind the rest of the country in economic growth. While a state’s tax policy is not the sole determinant of economic performance, taxes affect the decisions that people make about spending and investing their money. In addition, tax rates affect where people work and employ their capital. As of 2013, Missouri had the 21st highest income tax rates in the country. A land tax would cause less economic harm than income taxes, and among income taxes, income taxes on capital are the most harmful. If the state replaced its income tax with a revenue neutral sales tax, it would realize faster economic growth. In addition, elimination of taxation on pass-through income and C-corporations could be combined with reform of tax credits to help achieve revenue neutrality. Doing so would make eliminating the taxes more defensible while also promoting growth.

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