Income tax repeal to get rare test with Missouri voters
Voters in Missouri will get a rare chance to decide the future of a state revenue stream as the November ballot is set to include a constitutional amendment that would start the process of eliminating the individual income tax. The measure, approved by the Missouri Legislature last week, also would authorize changes to the sales tax, setting up a key question for lawmakers and households: how far a state can shift away from taxing wages and toward taxing consumption while still funding government.
Under the proposal, Missouri’s General Assembly would be directed to eliminate the individual income tax through gradual reductions tied to revenue growth. The amendment would give the Legislature authority to raise revenue by imposing the sales tax on “any goods and services,” a formulation designed to allow lawmakers to tax broader categories of purchases and sidestep a sales-tax expansion ban that voters approved in 2016.
The Legislature would have five years to determine which additional sales to tax, and supporters are positioning the time frame as a way to avoid repeated ballot fights. Even so, the ballot language itself is written to focus on “phasing out” the income tax and “modify[ing]” the sales tax, rather than using the words “increase” or “expand,” raising the possibility that some voters may not immediately connect the income-tax elimination to a broader sales-tax reach.
Missouri’s effort fits into a wider pattern across the states. In recent years, lawmakers in many places have enacted reductions to taxes on income, sales, property or fuel as governments moved through the pandemic recovery and then pulled back from earlier revenue surpluses. In that environment, more than half of the states that levy income taxes reduced their top rates, while a separate group of states has for years relied on other tax bases rather than an income tax on individuals.
The AP story notes that some states have moved in different directions: New Hampshire and Tennessee ended taxes on interest and dividends, and Alaska is described as the only state to both impose a general individual income tax and then repeal it, a move lawmakers made in 1980 when lawmakers were flush with oil revenues. The story also describes other measures that have aimed at phasing out income taxes more gradually, including changes enacted in Kentucky, Mississippi, Oklahoma and South Carolina.
In Missouri, Gov. Mike Kehoe has made income-tax repeal a priority, arguing it would encourage economic growth and attract businesses and new residents. Will Spartin, who told a House committee that he attended business college in St. Louis but headquartered his beverage businesses in Florida, said he would like to return to Missouri if the state moves in that direction. “If Missouri moves in this direction, even gradually, it would be a meaningful signal to people like us that Missouri wants to compete for modern industries,” Spartin told lawmakers.
Opponents who spoke in the record frame the measure differently, focusing on the likelihood of higher taxes for everyday transactions. Sharon Wells, described as a retired elementary school teacher in suburban St. Louis, said she paid a few hundred dollars in state income tax last year and worried her overall tax bill could rise if the income tax is replaced with a broader sales tax.
Wells said she pays for services that currently are not taxed, including lawn mowing, hair salon visits, periodic medical and dental care and car maintenance. She warned that the proposal could bring some of those services into the taxable base. “I think it’s a huge mistake,” Wells said. “We’re already paying far more than we have in the past for groceries, medicine, all kind of services. Everything has gone up.”
Data cited in the story underscores the affordability and fairness concerns raised by opponents. The Institute on Taxation and Economic Policy estimated that a family earning between $49,000 and $78,000 annually would pay an average of $535 more in taxes if Missouri repealed the income tax and replaced it with higher sales taxes, and the institute said households earning less would face even larger increases. Carl Davis, the institute’s research director, told lawmakers: “Pretty clearly, this is going to be a tax increase for most people,” in the reporting.
Supporters argue that income tax policy can matter for where people and businesses choose to locate, even if it is not the only driver. The story also cites an analysis by the nonprofit Tax Foundation that uses IRS data, saying Texas, Florida and Tennessee ranked in the top five for net interstate migration of federal income tax filers in 2023, while higher-tax states including California, New York and New Jersey ranked near the bottom.
Katherine Loughead, director of state tax projects at the Tax Foundation, said that if Missouri’s referendum is approved, it could encourage other states to accelerate income-tax reductions already planned.