Property taxes are the most hated taxes in America, as various opinion polls have found through the years. That’s conventional wisdom.
However, one poll, conducted in 2024 for UChicago Harris/AP-NORC, shows the gap narrowing. There seems to be a general and almost equal dislike toward sales, property and income taxes.
Which makes what happened last week in Missouri so interesting. It also ought to make some Utah leaders think twice.
Americans seem to treat taxes the way a strict 19th-century parent would treat children. They should neither be seen nor heard.
Why we hate property taxes
We hate property taxes because they come to us in a lump sum every year. Income taxes are much the same, with the added twist that many people have to hire professionals to help them file returns.
Sales taxes, however, are for the most part, silent. We see them at cash registers, but only in very small increments. No one knows how much they spend on them in a year. The Tax Foundation, a private research organization, tried to calculate this a couple of years ago and came up with a mean cost of $1,334 per year, or $235 for every percentage point of a state or local government’s tax rate. But not every state has a sales tax, and the rates vary widely in those states that do.
These debates aren’t going away. Rather, they are a living example of the idea that states are 50 laboratories of democracy.
All of which is a complicated way of saying pay attention to Missouri.
Voters there faced a ballot question that would have changed the state Constitution and gradually eliminated the state’s income tax. It failed 83% to 16%, the kind of margin that could make politicians reconsider their life choices.
It didn’t just lose, it lost in every county, according to MarketWatch. Republicans and Democrats alike said, “No, thanks.”
Why keep the income tax?
Why would they want to hang on to the income tax?
Republican Gov. Mike Kehoe said he would work with lawmakers to enact other cuts. He’s already signed legislation ending the Missouri’s capital-gains tax. But the income tax will remain.
Missouri has a de facto flat tax rate. Officially, it’s a graduated rate that extends from 2% to 4.7%, but families have to earn only $9,436 per year for the top rate to apply.
But its sales tax is only 4.225%, and advocacy groups argued it would jump into double digits to make up for the $8.5 billion hole left by ending the income tax. That, apparently, was too much, even for a mostly silent tax.
In Utah, Republican lawmakers have been steadily whittling away at the state’s flat-rate income tax, lowering it from 5% to the current 4.45%. Lawmakers I’ve spoken with through the years have made no secret of their desire to kill it entirely, but they worry about how to replace the money. Unlike Missouri, Utah’s combined state and local sales tax rates already are high, ranging from 6.35% to 9.55%, depending on where you live, according to the Utah State Tax Commission.
Republican lawmakers tend to make two arguments against the income tax. One is that it is a tax on productivity. If you want less of something, you tax it.
The other argument is that the income tax makes it harder to attract businesses to the state, especially when neighbors Nevada and Wyoming don’t have one. That argument tends to lose steam when you compare Utah’s impressive recent population growth with other states.
Sales taxes are seen as mostly voluntary. You don’t have to buy most of the things you buy. But sales taxes hit the poor the hardest, and voters don’t like any tax that is excessively high.
These debates aren’t going away. Rather, they are a living example of the idea that states are 50 laboratories of democracy.
State competition underway
As MarketWatch reports, “many Republican-leaning states have been cutting back taxes or going for flat rates. In the other corner, Democrat-led states have been dialing up taxes on their richest residents.”
We’ll see which ones get the best results.
Like Missouri, Utah would need a constitutional amendment to end its income tax, which is a principal source of funding for public schools. But, with or without that, lawmakers remain anxious to chip away at income taxes gradually.
Meanwhile, Americans probably wish someone would tackle the federal income tax instead. The National Taxpayers Union Foundation says the U.S. tax code, when IRS regulations are included, is now more than 16 million words long. It’s also incapable of stemming an annual funding deficit that fuels a national debt nearing $40 trillion.
Compared to that, state arguments over taxes can seem trivial.