Missouri voters will decide on August 4 whether to approve a constitutional amendment that could eventually eliminate the state’s individual income tax while allowing lawmakers to broaden the state’s sales and use tax base.
Supporters say the measure would make Missouri more economically competitive and encourage investment, while opponents argue it could shift more of the tax burden onto lower- and middle-income households if additional sales taxes are imposed.
The proposal does not immediately eliminate the income tax but creates a constitutional framework for lawmakers to phase it out under specified conditions.
What Is Amendment 5?
Amendment 5 would amend the Missouri Constitution to authorize a gradual phaseout of the state’s individual income tax.
According to supporters, reductions would occur only if specified revenue conditions are met, with the goal of maintaining overall state revenue.
The amendment would also prohibit reinstating the individual income tax once it has been fully eliminated unless the constitution is amended again.
How Would Missouri Replace the Lost Revenue?
Rather than reducing overall state revenue, the proposal would allow lawmakers to expand the state’s sales and use tax base.
The amendment itself does not specify:
- Which additional goods or services would be taxed.
- What the future sales tax rates would be.
- When specific tax changes would take effect.
Those decisions would be made through future legislation if voters approve the constitutional amendment.
Supporters: Economic Growth and Competitiveness
Governor Mike Kehoe has made eliminating Missouri’s individual income tax a key policy objective.
Supporters argue that reducing income taxes could:
- Encourage business investment.
- Improve Missouri’s competitiveness with neighboring states.
- Attract new residents and employers.
- Increase long-term economic growth.
Republican State Representative Bishop Davidson has argued that giving lawmakers flexibility is preferable to embedding detailed tax policy directly into the state constitution.
According to supporters, future tax legislation would be required to offset revenue losses from income tax reductions.
Opponents: Uncertainty and Distributional Effects
Opponents say the amendment provides broad authority to reshape Missouri’s tax system without specifying how that authority would be used.
Critics argue that voters are being asked to approve a constitutional change before seeing detailed legislation identifying:
- Which services would become taxable.
- The applicable tax rates.
- How the burden would be distributed among different income groups.
The Missouri Realtors Association has expressed concerns that the proposal grants lawmakers significant discretion without clearly defining future tax policy.
Independent Analysis
The Institute on Taxation and Economic Policy (ITEP), a nonprofit research organization, has analyzed the proposal and concluded that its effects would vary across income groups.
According to ITEP’s modeling:
- Higher-income households would generally receive larger benefits from eliminating the income tax.
- Some middle-income households could pay more overall if sales taxes expand substantially.
- Lower-income households and some retirees could also face higher overall tax burdens, depending on future legislation.
These estimates are based on economic modeling and assumptions about future tax policy. The actual effects would depend on the legislation enacted if Amendment 5 is approved.
Supporters of the amendment have disputed ITEP’s conclusions.
What Could Be Taxed?
Because Amendment 5 does not identify specific taxable items, uncertainty remains about which sectors could eventually be affected.
Public discussions have included possible expansion of sales taxes to services that are currently exempt, such as:
- Home repair.
- Personal care services.
- Vehicle maintenance.
- Certain professional services.
However, no final list has been proposed.
Governor Kehoe has publicly stated that he does not support taxing sectors such as agriculture, healthcare, or real estate, although those exemptions are not explicitly included in the constitutional amendment itself.
Comparisons With Other States
Supporters frequently point to states such as Tennessee, which does not levy a broad individual income tax, as examples of states that have experienced economic growth.
Critics often cite Kansas, where large income tax reductions enacted in 2012 contributed to significant budget shortfalls and were later substantially reversed.
However, economists note that the Kansas experience involved a broader package of tax changes and fiscal conditions than those proposed in Missouri, making direct comparisons imperfect.
The long-term effects of tax reform depend on numerous factors, including spending decisions, economic growth, population trends, and the final structure of the tax system.
What Happens if Amendment 5 Passes?
Approval of Amendment 5 would not immediately eliminate Missouri’s income tax.
Instead, it would authorize lawmakers to:
- Develop legislation to reduce the income tax over time.
- Expand sales and use taxes as permitted by the amendment.
- Implement changes subject to the amendment’s constitutional requirements.
Additional legislation would still be required before specific tax changes take effect.
Why This Matters
Missouri collects a substantial share of its general revenue through the individual income tax.
Any transition to a different tax structure would represent one of the state’s most significant fiscal policy changes in decades and could influence future debates about tax reform in other states.
The proposal also highlights a broader national discussion over whether states should rely more heavily on consumption taxes, income taxes, or a combination of both to fund public services.
The Bottom Line
Missouri voters will decide on August 4 whether to approve Amendment 5, a constitutional proposal that would allow lawmakers to gradually eliminate the state’s individual income tax while expanding sales and use taxes to replace lost revenue. Supporters argue the measure could strengthen the state’s economy and competitiveness, while opponents say it lacks important implementation details and could increase taxes for some households depending on how future legislation is written.
TL;DR
- Missouri voters will decide Amendment 5 on August 4.
- The amendment would allow lawmakers to gradually eliminate the state’s individual income tax.
- It would also permit the expansion of state sales and use taxes to replace lost revenue.
- Supporters argue the measure could promote economic growth and improve competitiveness.
- Critics say the proposal lacks details about which goods and services would be taxed and warn some households could ultimately pay more.
