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Missouri, Other States Proposing Tax Bills That Could Hurt The Working Class

State tax shifts may increase costs for working-class households.

By Jordan Major , Edited by Kristy DeSmit

Updated April 8, 2026

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Many state lawmakers across the country are pitching new tax plans as a way for residents to keep more of what they earn. Lower income taxes, simpler systems, and stronger economic growth are the main selling points.

Critics argue, however, that some of these proposals could quietly shift more of the tax burden onto working- and middle-class households. Missouri is one of the clearest examples in 2026, but it's not alone.

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The shift is happening in Missouri

Missouri lawmakers are considering changes that would gradually reduce or eliminate the state's income tax while increasing reliance on sales taxes to make up the difference.

At first glance, it looks like a straightforward tax cut. Income taxes would go down or disappear, which sounds like a clear win for residents. The structure, however, tells a different story.

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From income taxes to sales taxes

Income taxes are typically designed so that higher earners pay a larger share of what they make. Sales taxes work differently. They apply to spending, not income, which means they often fall more heavily on households that spend a larger portion of what they earn.

This is where concerns begin. According to analysis from the Institute on Taxation and Economic Policy, middle-income households earning roughly $49,000 to $78,000 could see their taxes increase by about $535 per year on average under proposals like Missouri's.

Households earning between about $24,000 and $49,000 could see increases closer to $850 annually, or roughly 2.4% of their income.

Meanwhile, the top 1% of households could receive average tax cuts of nearly $40,000 per year. The contrast highlights a key concern: the structure may reduce taxes overall, while shifting who pays them.

Why the structure matters more than the headline

The phrase "tax cut" doesn't always tell the full story. When income taxes are reduced, the benefits tend to scale with income. Higher earners, who pay more to begin with, often see larger dollar savings.

Expanding sales taxes shifts more of the burden onto consumption. Because lower-income households spend a greater share of their income, they often end up paying a larger percentage overall.

The shift can happen gradually. A lower paycheck deduction may stand out, while higher costs at the register are spread across hundreds of transactions throughout the year.

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What this looks like in real life

The difference becomes clearer when you look at how households use their income. A family earning $40,000 may spend most of what they make on essentials such as housing, food, transportation, and basic services. A large share of that income is exposed to sales taxes.

A household earning $250,000 is more likely to save or invest a portion of its income. That portion is not subject to sales tax, which lowers its effective tax rate.

As sales taxes rise or expand, the first household feels the impact across nearly every purchase, while the second feels it on a smaller share of overall income.

Expanding taxes to services

One of the more significant changes being considered is expanding sales taxes to services. Traditionally, many services such as home repairs, personal care, and professional work were not taxed. That distinction is starting to blur as states look for new revenue sources.

Adding services to the tax base can generate more consistent revenue, but it also raises costs for routine needs. Car repairs, maintenance, and everyday services may suddenly carry additional tax costs. For working-class households, these are not optional expenses.

The broader shift happening across states

Missouri is not an isolated case. Several states are exploring similar approaches, often framed as efforts to simplify tax systems or improve competitiveness. Reducing income taxes can be politically appealing and is often tied to arguments about attracting businesses and encouraging growth. Replacing that revenue, however, requires trade-offs.

States may increase sales tax rates, expand what is taxed, or rely more heavily on consumption-based systems. Each of those changes shifts how taxes are distributed across income levels.

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Why critics call these changes regressive

Tax systems are often judged by how the burden is distributed. For instance, a progressive system asks higher-income households to contribute a larger share. A regressive system does the opposite, placing more pressure on lower-income households relative to what they earn. Sales taxes fall into that second category.

Because they are tied to spending rather than income, they take up a larger percentage of earnings for households that spend most of what they make. That's why policy experts often describe shifts toward consumption taxes as regressive.

The argument from supporters

Lower income taxes can make a state more attractive to businesses and higher earners, potentially supporting economic growth. A simpler system may also be easier to manage.

Some policymakers argue that consumption taxes provide a more stable revenue source because they are tied to spending rather than income. From that perspective, shifting the tax mix is less about redistribution and more about long-term economic strategy.

The trade-offs households may notice

For residents, the impact shows up in everyday decisions. Higher sales taxes increase the cost of routine purchases. Expanding taxes to services raises the price of maintenance, repairs, and other essential needs. Over time, those changes make it harder to manage monthly budgets.

Even small increases add up. A one percentage point increase in sales tax on $25,000 of annual spending results in an additional $250 per year. Unlike income taxes, which are often adjusted once a year, these costs are felt continuously.

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Bottom line

Federal tax policy tends to dominate headlines, but state-level changes often have a more immediate impact on daily life. They affect how much you pay every time you make a purchase, maintain your home, or pay for services.

Over time, those costs shape your overall cost of living in ways that are not always obvious at first. And because many of these changes are framed as simplifications or tax cuts, it's easy to miss how the full picture is shifting.

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