On August 4, Missouri voters will cast their ballots on Amendment 5, a Constitutional measure designed to gradually eliminate the state’s individual income tax.
Proponents argue the amendment would enhance Missouri’s economic competitiveness and enable residents to retain more of their income. Critics contend it could result in higher sales taxes, eliminate taxpayer protections, and disproportionately burden low and middle income families.
The amendment stems from House Joint Resolutions 173 and 174, which the Missouri General Assembly passed this year. According to Gov. Mike Kehoe’s May 22 statement, Amendment 5 would phase out the individual income tax contingent on revenue growth and mandate reductions in property and local taxes to counterbalance increased local sales tax revenue while maintaining public school funding. The amendment requires legislators to enact measures reducing Missouri’s individual income tax rate over the next five years as state revenues grow, with the goal of complete elimination.
Rep. Ben Keathley (R-District 101), representing Chesterfield, supports the amendment, stating it provides a structured approach to reducing income taxes as state revenues expand.
“It requires us to do revenue based triggers that bring down the income tax,” Keathley explained.
Keathley notes that Missouri previously lowered its top individual income tax rate from 6% to 4.7% in recent years while maintaining steady revenue growth.
“We’ve been cutting the income tax and have not lost revenue,” Keathley stated.
A significant controversy surrounding Amendment 5 concerns potential sales tax expansion to compensate for lost income tax revenue. Keathley explained that the amendment would permit lawmakers to consider levying sales taxes on currently exempt services.
“Amendment 5 itself does not in any way raise any taxes,” he noted. “It authorizes the potential of closing sales tax loopholes that are exempting certain industries.”
Keathley, a lawyer, cited legal services as an example of services presently exempt from Missouri sales taxes.
He further noted that proponents believe applying sales tax to services would modernize Missouri’s tax structure as the economy increasingly shifts toward service-based activities.
Critics argue the amendment grants lawmakers excessive power to circumvent constitutional tax protections established by voters in previous elections. Scott Charton, spokesperson for Missourians for Fair Taxation, contends that legislators already possess the authority to reduce or eliminate the income tax through statute and do not require a constitutional amendment. Charton maintains the amendment is only needed because it would permit lawmakers to disregard constitutional limits on tax increases.
He referenced several protections, including the Hancock Amendment, which mandates voter consent for major tax increases; a 2010 constitutional amendment prohibiting real estate transfer taxes; and a 2016 constitutional amendment forbidding sales taxes on services.
“The current taxpayer protections in the Constitution prevent lawmakers from raising these new taxes without voter approval,” Charton explained. “They could enact what would be Missouri’s largest tax increase in history. It provides them with unlimited authority without those constitutional safeguards.”
He additionally warned that the amendment could trigger significantly higher sales taxes.
“According to the nonpartisan Missouri Budget Project, to generate sufficient revenue to replace the income tax, Missouri lawmakers would need to increase the combined average sales tax rate to 16%,” Charton stated.
Charton noted that sales taxes disproportionately impact lower-income households, retirees, and individuals on fixed incomes who may already be exempt from income tax due to insufficient earnings, or who receive non-taxable pensions or social security benefits.
“Under this amendment they don’t benefit from an income tax reduction because they’re not currently paying one,” Charton explained. “If you eliminate the income tax, they would still be subject to higher sales taxes on everyday purchases.”
Keathley emphasized that eliminating Missouri’s 4.7% individual income tax would instantly increase workers’ take-home earnings.
“Every Missouri worker would receive an immediate 4.7% wage increase,” he remarked.
He contended that expanding sales taxes to services would mainly impact higher-income residents who frequently purchase professional services.
“Lower income people typically do not purchase services such as accounting or legal representation, or hire contractors for home renovations or lawn maintenance,” Keathley noted.
Charton countered, asserting that many frequently used services could become taxable, raising expenses for consumers. He mentioned services including childcare, healthcare, veterinary services, plumbing, and HVAC repairs. He also cautioned that although current lawmakers have pledged against certain sales tax increases, future elected officials might reverse these commitments since such guarantees are not embedded in the amendment language.
The amendment faced a court challenge regarding ballot language, with objections that the wording emphasized income tax elimination while insufficiently describing other amendment consequences. A Cole County court subsequently mandated ballot language revisions, determining changes were necessary to more accurately convey the amendment’s effects. Following the revision, the court permitted Amendment 5 to appear on the August 4 statewide primary ballot.
