New Study Compares Tax Systems in Missouri, Tennessee
A few of you may not have noticed that late last week, we released a brand-new case study on our main website, “All Caught Up: How Tax Policy May Have Allowed Tennessee to Outgrow Missouri,” by Jenifer Zeigler Roland, the Show-Me Institute’s director of publications, and Dave Roland, one of the institute’s policy analysts.
The study finds that although Missouri was once the unquestionable leader in terms of population and GDP, Tennessee gradually caught up throughout the 1900s in almost every economic metric. Although many factors certainly contribute to Tennesse’s growth and Missouri’s relative stagnation, one of the most illuminating pieces of data is that Missouri levies a state income tax on its citizens, while Tennessee does not.
Empirical research shows that tax policy has a marginal but significant effect on how people choose where to live — voting with their feet to minimize their tax burdens. Economic growth tends to flow to areas with lower tax burdens, and although Tennessee has a higher sales tax than Missouri does, its overall tax burden is unquestionably lower. If Missourians want their state to once again become an economic powerhouse, they should encourage a sensible tax policy that’s both low and consistent, and that eliminates as much dead-weight loss as possible. That means thinking hard about eliminating Missouri’s state income tax.