Missouri intends to phase down, and ultimately eliminate, its state income tax. ... Washington, in contrast, suddenly embraces what amounts to an income tax despite a constitutional provision making it a no-income-tax state.

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“We should not carry a banner of pale pastels but of bold colors which make it unmistakably clear where we stand...”  

In our politically polarized era, when so many voices advocate greater moderation and centrism, Ronald Reagan’s words remind us that sharp distinctions serve an important purpose in exposing the merits of competing worldviews.  

Few subjects offer that contrast more vividly than the diverging paths of individual American states on the issue of income taxation.  

Consider the parting of ways between states like Missouri, on a path toward aggressive reduction of income tax burdens, and Washington, which is moving in the opposite direction by abandoning its status as a state with no income tax.  

Those aren’t subtle policy tweaks, but fundamental philosophical differences.  One side trusts individuals to keep more of what they earn, the other curiously insists that government deserves a larger share.  

Missouri intends to phase down, and ultimately eliminate, its state income tax.  Its lawmakers recognize that economic growth flourishes when individuals and businesses retain more of their own earnings.  Moreover, lower tax rates don’t merely justly reward success and effort, they invite more of it.  They signal to entrepreneurs, employers, investors and workers alike that a state is open for business.  

Washington, in contrast, suddenly embraces what amounts to an income tax despite a constitutional provision making it a no-income-tax state.  Proponents claim that it targets only wealthy residents, but history teaches that once income taxation gains inertia, it inexorably expands.  

Look no further than the nation’s first constitutional income tax, which initially imposed a top rate of 6% on incomes over $500,000.  What begins as a “limited” tax often becomes tomorrow’s heavy burden.  

That divergence reflects a nationwide trend, as Americans vote with their feet according to the irrefutable data.  High-tax states continue to lose residents and business, while low-tax states continue to gain both.  According to Internal Revenue Service (IRS) migration data, which tracks interstate movement through tax filings, the effect is observable across all 50 states.  

Those states with lower or no income taxes – like Texas, Florida and Tennessee — have experienced significant population inflows in recent years.  IRS analyses show that Florida alone gained over 125,000 net tax filers in a single year, while Texas added over 88,000, placing them among the top destinations for interstate migration.  

Meanwhile, according to the same analyses, high-tax states like California, New York and Illinois continue to sustain population loss.  California lost over 144,000 filers in a single year, New York lost over 108,000 and Illinois lost tens of thousands as well.  That exodus extends beyond individuals, moreover.  Employers, from small businesses to giant corporations, increasingly flee those states in favor of more hospitable tax climates.  

The underlying reasons are obvious:  Higher taxes reduce take-home pay, increase operating costs and diminish overall economic competitiveness.  

The consequences also extend beyond raw population figures, as individuals and businesses fleeing a state take with them a disproportionate share of tax revenue.  For example, Illinois alone lost nearly $10 billion in income in a single recent year due to outmigration, much of it from demonized higher earners.  

Conversely, lower-tax states benefit from a virtuous cycle:  As new residents and businesses arrive, economic activity expands.  Additionally, job creation accelerates, property values rise and incoming tax revenues often increase – even at lower rates – because the tax base itself grows.  Between 2020 and 2023 alone, higher-tax states lost roughly 2.8 million residents to lower-tax states, again with Florida and Texas leading those gains.  

Proponents of higher taxes may respond that taxes are just one factor among many influencing migration decisions, but they’re nevertheless among the most consequential variables that policymakers can influence.  And particularly in an era of remote work and mobile capital, individuals and businesses are less tethered to any single location.  They can, and do, relocate to jurisdictions offering more favorable tax environments.  

Thus, the contrast between Missouri and Washington illustrates a broader national trend.  One state embraces a Reaganesque vision of lower taxes, the other embraces higher taxation and more regulation.  

Those constitute the “bold colors” that Reagan referenced, and they’re on full display for American citizens and businesses to see.  

Accordingly, our “laboratories of democracy” continue to work exactly as intended.  States offer differing approaches, and citizens and employers render their verdicts not through polls or rhetoric, but through actions.  

The results, painted in bold and unmistakable colors, speak louder than the rhetoric and rationalizations of higher-tax advocates.