Mississippi and Kentucky are making bold moves to eliminate state income taxes, joining a national push to reduce tax burdens and attract economic growth. If successful, these changes could reshape the states’ economies—and their politics.
Key Facts: States Advancing Plans for Eliminating State Income Taxes
- Mississippi passed a law in 2024 to reduce its income tax rate from 4% to 3% by 2030, with the potential to phase it out entirely by 2040.
- Kentucky began cutting its income tax in 2022, aiming for zero through legislative approval of each step.
- Eight U.S. states currently charge no personal income tax; Washington taxes capital gains but not wages.
- Critics warn income tax repeal could harm essential services by shifting the tax burden to sales taxes, which impact lower-income residents more.
- Other states, including Oklahoma and Missouri, are considering similar tax-cutting paths.
The Rest of the Story: State Income Tax Elimination Efforts Gain Momentum
Mississippi’s income tax reduction plan hinges on steady economic growth and meeting revenue benchmarks.
If successful, the state could eliminate its income tax entirely by 2040.
Governor Tate Reeves believes the move will turn Mississippi into a magnet for workers and businesses, mimicking the success of states like Florida and Texas.
The law also cuts grocery sales taxes and raises the gas tax to help offset revenue losses.
In Kentucky, lawmakers have already approved a drop in the income tax rate to 3.5% starting in 2026.
However, further cuts require ongoing approval by the legislature.
This year, two laws were passed—one lowering the rate and another adjusting the criteria for future reductions.
Democratic Governor Andy Beshear signed the rate cut but allowed the second bill to pass without his endorsement, calling it deceptive.
Other states are watching closely.
Oklahoma’s House passed a similar revenue-triggered income tax phaseout plan, and Missouri’s governor supports ending income taxes on capital gains.
Meanwhile, Tennessee and New Hampshire have recently completed full rollbacks of taxes on interest and dividends.
HOLY TOLEDO EVERY STATE SHOULD BE DOING THIS.
♦️CAN I GET AN AMEN?♦️Mississippi Abolishes State Income Tax in Historic Win for Working Families and Economic Freedom.
“While Washington continues to suffocate the American people with taxes, inflation, and runaway spending,… pic.twitter.com/QyQY7QhMt3— 🦅 Eagle Wings 🦅 (@CRRJA5) March 29, 2025
Commentary: Eliminating State Income Taxes Will Supercharge State Economies
Phasing out income taxes is a strategic move that benefits workers, entrepreneurs, and local economies.
States like Texas and Florida—both income tax-free—have experienced strong population and business growth.
Their example proves that lower tax burdens can attract investment, talent, and innovation.
Mississippi’s plan is particularly promising.
Reducing the income tax and targeting it for full elimination sends a clear signal: the state is open for business.
Governor Reeves understands that people are more likely to move where they can keep more of what they earn.
More disposable income also means more spending, which boosts sales tax revenue and fuels the broader economy.
Critics argue that cutting income taxes hurts public services.
But that assumes government spending is always efficient.
Trimming bloated budgets and focusing on core services can free up funds without raising taxes elsewhere.
States don’t need to choose between prosperity and basic services—they just need to govern smarter.
Moreover, relying more on consumption-based taxes shifts tax liability based on choice, not just earnings.
When people spend more, they pay more.
It’s fairer and more transparent.
And since tourists and non-residents also contribute to sales taxes, the overall tax base expands.
States that hesitate may lose out.
Businesses often relocate based on tax structure, and workers follow.
By acting now, Mississippi and Kentucky can get ahead of the curve and avoid being left behind.
Ending the income tax isn’t just a tax move—it’s an economic development plan.
And in a world where competition between states is real and growing, those who lead on tax freedom will win.
The Bottom Line: Tax Reform and Growth Potential
Mississippi and Kentucky are taking bold steps to join the ranks of states with no personal income tax.
If their plans succeed, they’ll reshape their economic future and attract new residents and industries.
The momentum behind eliminating state income taxes continues to grow—and the political and economic stakes are rising with it.
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