Income tax cut on Missouri ballot; Illinois may see more outmigration

By Sean Reed | The Center Square
The Center Square

(The Center Square) – A ballot measure in front of Missouri voters next month could give some Illinois residents in the Metro East area a reason to move across the Mississippi River if it passes.

The measure, which will be present on ballots in the state’s primary election Aug. 4, proposes an amendment to the Missouri Constitution that could phase out income tax entirely.

Andrew Wilford, director of state policy at the National Taxpayers Union Foundation, explained the ballot measure would allow the state legislature to eliminate income tax by raising other revenue sources, such as an increase to sales tax.

“They haven’t officially created the structure for that, but that would be the general idea,” Wilford said. “Currently, Missouri has a top tax rate of about 4.7%. A few years ago that was relatively low for the region, but a lot of the state’s neighbors have cut taxes pretty significantly in the intervening years.”

Bryce Hill, senior director of fiscal and economic analysis for the Illinois Policy Institute, noted there’s a larger trend, and Missouri is following other states in reducing, flattening or eliminating income taxes.

“Many states did that – started this process after the COVID-19 pandemic, when state tax revenues didn’t decline as much as anticipated and then subsequently grew very rapidly,” Hill said. “Illinois did not have that luxury. A lot of that excess revenue went to pay for previous debts.”

Hill said the proposed cut could exacerbate outmigration across the Mississippi River. He noted a net 7,500 Illinoisans moved to the state in 2024. If the measure is approved, Illinois’ second largest metropolitan area, the Metro East, could see some residents move, according to Hill.

“Individuals can easily relocate from one major population center to the other side of the border without having to completely uproot their lives,” Hill said. “They don’t necessarily have to change jobs even. They can still be nearby to friends and family and their social network.”

According to polling by YouGov and Saint Louis University in February, the ballot measure could just narrowly pass, if the electorate votes along the lines of their findings – that 52% of voters in the state would prefer the Missouri state government rely on sales taxes over individual income taxes.

Wilford said the Missouri legislature is planning on phasing out the tax in a way that will be visible to residents, and on both sides of the border.

“There’s good ways and bad ways to do it. The bad way is you tax business to business services,” Wilford said. “From what I’ve heard, Missouri isn’t planning to do that.”

He noted that residents of Illinois who work in Missouri would have to pay income tax to Illinois even if Missouri residents vote to do away with it, while also facing increased sales tax in transactions across the river.