Both Mississippi and Kentucky are racing to make history as the first state since 1980 to eliminate income tax completely. Mississippi plans to drop from 4% to 3% by 2030, with full elimination by 2040. Kentucky’s starting with a cut to 3.5% in 2026. Both states are riding high on post-pandemic budget surpluses, but critics warn about public services taking a hit. The path to zero taxes isn’t exactly a smooth ride.
How do you make a state more appealing to businesses and residents? If you’re Mississippi or Kentucky, you bet big on ditching income taxes. No state has eliminated its personal income tax since Alaska did it in 1980. That’s forty long years of tax tradition – and now two states are racing to break it.
Mississippi’s throwing down the gauntlet first. They’re planning to slash their 4% income tax to 3% by 2030, with dreams of zeroing it out by 2040. The state is aiming to boost its economic growth levels to match states like Florida and Texas. Not to be outdone, Kentucky’s plotting its own tax escape, starting with a cut from 4% to 3.5% in 2026. Both states are riding high on post-pandemic budget surpluses and crossing their fingers that it’ll work out.
It’s a race to zero as Mississippi and Kentucky compete to become the first state since 1980 to eliminate income tax.
The logic seems simple enough. No income tax means more money in people’s pockets. More pocket money means more spending. More spending equals higher sales tax revenue. It’s working for Florida and Texas, right? Well, maybe. Critics are quick to point out that losing income tax revenue is like shooting yourself in the foot – especially if federal funding takes a nosedive.
Here’s where it gets messy. Both states have tied their tax-cutting dreams to specific conditions. Mississippi needs to hit revenue benchmarks, while Kentucky requires legislative approval for each cut. Democratic lawmakers are nervously eyeing public services, wondering how schools and healthcare will stay funded without income tax dollars. States like Oklahoma and Missouri are also joining this tax-cutting trend, with their own plans to eliminate or reduce income taxes.
The timing’s interesting, though. Both states are surfing waves of budget surpluses from the post-pandemic period. But economic tides change fast, and neither state is exactly rolling in spare cash. Mississippi, particularly, is wrestling with some serious poverty issues.
Will either state actually pull it off? It’s a high-stakes gamble. They’re betting they can join the no-income-tax club without wrecking their budgets. But breaking a 40-year tradition isn’t easy – just ask the other states that have tried and failed. One thing’s certain: the rest of the country will be watching to see who blinks first.
