For many Missouri families, any tax cut will be swallowed by rising health care costs

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In 2012, Kansas Gov. Sam Brownback cut income taxes with promises of economic growth. Instead, the state faced years of budget shortfalls, education cuts, and credit downgrades. Just five years later, the Republican-controlled legislature voted to override Brownback’s veto and restore the income tax. 

Missouri is now debating a similar tax path at the same moment a major source of federal health care assistance is being withdrawn.

Enhanced Affordable Care Act subsidies have expired for approximately 417,000 Missourians after Congress adjourned without extending them. Those subsidies have been a key reason marketplace coverage remained affordable for middle-income families over the past several years.

According to the Kaiser Family Foundation, expiration of the enhanced Affordable Care Act subsidies would more than double what subsidized enrollees pay for coverage on average. Annual premium payments are projected to rise from $888 in 2025 to $1,904 in 2026 — an increase of $1,016, or 114%. 

For many middle-income households, that increase alone exceeds the annual income tax savings being promised under Missouri’s tax proposals. 

According to December estimates, state revenue is running roughly $400 million below projections, largely due to the capital gains tax exemption enacted earlier this year which is now estimated to cost around $500 million annually — far more than originally forecast.

Gov. Mike Kehoe has made eliminating Missouri’s income tax his top priority for 2026, arguing that lower taxes will put more money in Missourians’ pockets and attract businesses. But for households losing ACA subsidies, health care costs are projected to rise by more than $1,000 a year at the same time tax savings are measured in the hundreds.

Analysis by the Institute on Taxation and Economic Policy shows that about two-thirds of the capital gains tax exemption benefits flow to the top 1% of earners. The average millionaire saves roughly $43,000 a year. Working families save about $80. Those least affected by rising healthcare costs receive the largest tax benefits, while families facing four-figure premium increases see little relief.

Kansas’s experience offers a cautionary example of how aggressive tax cuts can erode state revenue and shift costs onto public services relied on by families and employers alike.

State leaders are now proposing to eliminate the income tax entirely — a revenue source that generates about $8.7 billion annually and accounts for roughly two-thirds of Missouri’s general revenue. That money supports core services, including public schools, Medicaid, mental health care and child protection.

Kehoe and House Speaker Jon Patterson say their approach will avoid Kansas’s mistakes through gradual phase-ins and fiscal guardrails. The full proposal is expected to be revealed during the governor’s State of the State address next week.

For several years, Missouri has had historically large reserves. The surplus peaked at nearly $8 billion in June 2023. Large sums have been set aside for improvements to Interstates 70 and 44, a major expansion of the Capitol Building, and construction projects on college campuses and elsewhere. But one-time reserves cannot offset ongoing annual losses from permanent tax cuts or recurring health care cost increases.

Missourians need clear answers to basic questions: Which state and local services would be reduced or eliminated, and by how much? What revenue sources would replace $8.7 billion in annual income tax revenue? And what assumptions about economic growth and revenue replacement underpin the proposed phase-ins?

Without answers to these questions, it’s impossible to distinguish responsible restructuring from a high-stakes experiment undertaken amid existing fiscal pressure.

States without income taxes typically rely on oil and gas royalties or significantly higher sales and property taxes — revenue sources Missouri lacks.

According to Becker’s Hospital Review’s December 2025 analysis of Center for Healthcare Quality and Payment Reform data, 29 of Missouri’s rural hospitals are already at risk of closure, including 12 at immediate risk within the next two or three years.

Marketplace coverage has become a major source of insurance across much of the state. Analysis from Washington University shows that in most Missouri counties, growth in ACA marketplace enrollment outpaced Medicaid enrollment during the expansion period.

As subsidies expire, more Missourians are likely to delay or forgo coverage, increasing uncompensated care hospitals are legally required to provide. Reductions in state revenue place additional pressure on Medicaid funding that rural hospitals depend on, threatening to accelerate closures and leave some communities without local emergency or maternity care.

Each dollar Missouri spends on traditional Medicaid draws roughly $1.80 in federal matching funds. For Medicaid expansion enrollees, the federal government covers about 90% of costs, leaving the state responsible for roughly 10%.

In December, U.S. Sen. Josh Hawley broke with his party to support extending the enhanced subsidies, citing families fearful of losing affordable coverage. Missouri’s state leadership, meanwhile, remains focused on advancing income tax elimination.

For many Missouri families losing ACA subsidies in 2026, projected healthcare cost increases exceed the tax savings being proposed — at the same time Missouri’s general revenue is already running below projections, limiting the state’s ability to absorb additional health care and coverage costs.