Missouri voters weigh ending income tax. Here’s how other states replace the revenue

Individual income tax revenue made up 63% of the state’s general revenue in fiscal year 2025. The amendment asks voters to require the legislature to gradually reduce the individual income tax rate with the goal of eliminating it by 2032.

A yes vote will allow a broad sales tax on all goods and services to make up for the loss in revenue. This would repeal limits currently in place on such taxation. The state’s sales tax is 4.225%.

Gov. Mike Kehoe has suggested exemptions for healthcare, agriculture and real estate; the legislation passed by the House included no language for such exemptions.

The resolution’s sponsor, state Rep. Bishop Davidson, a Republican from Republic, noted the amendment that voters will consider does not mandate that the state make any changes to a sales tax. However, the Missouri budget must be balanced, so the loss in income tax revenue must be made up elsewhere.

Proponents of the resolution often compare Missouri to other states with no state income tax. Although a majority of these states rely on sales tax, their tax structures can vary drastically depending on different industries present, constitutional provisions or recent policy changes.

Here’s an overview of how the nine states without individual income tax generate state revenue:

Alaska became the first state to successfully repeal its income tax in 1980, thanks to the state’s oil boom. Almost all Alaskan oil production is on state-owned land, allowing the state to receive revenue in four different ways: production tax, property tax, royalties and corporate income tax.

According to the Resource Development Council, Alaska has made up to 90% of the state’s unrestricted general fund revenue from taxes related to oil in most years.

Roughly 30% of general fund revenue came from taxes on petroleum while 60% came from various investment returns. A majority of these investments came from Alaska’s permanent fund, which has received financial deposits used to invest in bonds, stocks and real estate.

Transfers from the fund make up a majority of investment revenues in Alaska’s unrestricted general and restricted designated general fund revenue.

Florida receives over 70% of its general revenue from sales tax with another 11% coming from corporate income tax. The state gets revenue from tourism through the Tourist Development Tax.

Nevada receives roughly 37% of its general revenue from a sales tax and use tax, including taxes on gaming fees, insurance premiums and a live entertainment tax.

The state’s base rate is 6.85%.

If Nevada were its own country, it would rank 10th in gold production, but tax revenue from natural resources only produces a small portion of revenue in taxes related to its natural resources. A state constitutional provision limits taxes on minerals.

New Hampshire phased out its individual income tax in 2025 and does not have a state sales tax either.

The state derives a little over a third of its budget from a business profits tax. New Hampshire has a meals and rooms tax, which serves as a form of tourism tax. This accounts for a little over one-tenth of its revenue.

New Hampshire makes up the remainder of its revenue from miscellaneous fees, such as its tobacco tax, Medicaid enhancement tax and its tax on real estate transfers.

South Dakota makes over 60% of its revenue from sales tax. The state has a base rate of 4.2% on general sales. The state also imposes a contractor’s excise tax, which is a 2% fee on the total cost of a construction project. This tax accounts for a little under one-tenth of the state’s budget.

Similar to Nevada, South Dakota has a strong mining industry but derives less than 1% of its revenue from its severance tax.

Tennessee makes up 60% of the state’s revenue from a general sales tax. Tennessee’s state sales tax is 7%. Tennessee employs a franchise and excise tax on corporations and businesses that contributes 16% of revenue.

In Texas, a 6.25% state sales and use tax is imposed on all retail sales, leases and rentals for most goods and certain services. The state first imposed a sales tax structure in 1961, and it provides over half of the state’s budget.

Texas fills the remainder of its budget with various taxes on motor vehicle sales, franchise taxes and taxes on the state’s natural resources.

Washington brings in about 45% of its budget from its sales and use tax. The state levies a fee of 6.5% on sales and transactions.

Washington makes almost a fifth of its budget from the state’s business and occupation tax, calculated based on the gross income of a business. The rate depends on which category of activity the business is classified as, with Washington having over 50 different classifications.

Washington also has a property tax that generates 13.4% of its revenue.

A massive reform to the state’s tax structure was approved in March when Senate Bill 6346 was signed into law: the first-ever “Millionaires Tax.” Beginning in 2028, a 9.9% income tax will be applied to taxable earnings above the $1 million standard deduction.

Wyoming makes a little under 40% of its revenue from its general and select sales tax structure.

Wyoming generates significant revenue from its mining industry. The state levies fees ranging from 1% to 6% for the various minerals and resources that are extracted.

Similar to Alaska’s permanent fund, the Permanent Wyoming Mineral Trust Fund receives revenue from its severance tax and is used by the state legislature to invest in various assets.

Investment income and severance taxes account for 47.51% of its general fund revenue, with miscellaneous revenue and tax sources filling the remainder of the budget.

Wyoming ranked ninth nationally for natural gas production and eighth in crude oil production in 2023. This allows the state to fund its entire budget reserve account just with federal mineral royalties or severance tax revenue.

State Rep. Steve Butz, a Democrat from St. Louis, argued that Missouri cannot replicate the similar success seen by other states that never had an income tax or repealed it.

“God bless Branson, but it’s not Orlando,” Butz said in a March committee hearing. “We are never going to be Texas, Texas has a huge percent of this nation’s energy in that state, and it’s just not below our ground.”

“You have to face the facts,” Butz added. “Tennessee hasn’t had an income tax; it’s not part of the way they fund their government, but their sales tax is dramatically higher.”

This story originally appeared in the Columbia Missourian. It can be republished in print or online.