Missouri voters rejected a ballot measure on August 4 that would have phased out the state’s individual income tax and expanded its sales tax, a shift one tax policy analyst had warned could weaken public services and fall hardest on lower- and middle-income residents.
Voters reject tax proposal
Missouri voters defeated Amendment 5, a proposed constitutional amendment that would have required reductions in the state individual income tax as net general revenue collections grow, with the goal of eliminating the tax by January 1, 2032. The measure failed, with approximately 83.3% opposed and 16.7% in favor. Roughly 1.4 million ballots were cast.
Under House Joint Resolution Nos. 173 & 174, each $20 million increase in prior-year net general revenue collections above an inflation-adjusted fiscal year 2025 baseline would have triggered a 0.01-percentage-point rate cut, up to 1.6 percentage points a year. If the revenue triggers had not reduced the rate to zero by 2032, the reductions would have continued until the tax was gone. Once the tax reached zero, Missouri could not have imposed a new one.
The amendment would also have authorized the General Assembly to expand state and local sales and use taxes to goods and services not taxable as of January 1, 2015. Beginning in 2029, local governments generally would have had to reduce certain sales, property, or earnings tax rates to offset added revenue from a base expansion. The measure prohibited reductions in public-school funding.
Governor Mike Kehoe (R), who backed the measure, had said it would make Missouri more competitive, attract jobs and investment, and let families keep more of what they earn. Republican State Representative Ann Kelley had said sales tax expansions would have to be paired with income and local tax reductions. Opponents, including Democratic State Representative Ashley Aune, said a broader sales tax base could raise costs for residents and businesses and create budget uncertainty.
Wesley Tharpe, senior advisor for state tax policy at the Center on Budget and Policy Priorities, told Checkpoint that the vote turned on a broader question: whether states should reduce income taxes and rely more heavily on consumption taxes.
A national policy divide
Tharpe said Missouri’s vote reflected a wider divide among states. He pointed to Kentucky, Mississippi, Oklahoma, South Carolina, and West Virginia, which have enacted policies intended to reduce their income taxes over time but have not fully eliminated them.
Other jurisdictions have taken a different approach. Tharpe said the Center has identified 11 jurisdictions, including the District of Columbia, that have enacted significant revenue-raising policies over the past five years to support public services. He cited Massachusetts, where voters in 2022 approved a 4% surtax on annual household income above $1 million. Tharpe said the revenue has exceeded expectations and funded investments including community college access, universal school meals, and bridge repairs.
State tax policy is not the sole means of attracting residents or businesses, Tharpe said. Families and employers also weigh schools, infrastructure, health care access, and quality of life when deciding where to live or invest.
Evidence behind growth and migration patterns
Supporters of income tax reductions often argue the changes will accelerate economic growth and draw new residents. Tharpe said those arguments are not firmly rooted in the evidence.
He pointed to the Center’s review of 20 major peer-reviewed studies published over roughly two decades. According to Tharpe, 15 found little to no clear economic effect from changes in state personal income tax rates. He also cited the five states that made the deepest personal income tax cuts after the Great Recession. According to the Center’s July analysis co-authored by Tharpe, all five recorded weaker gross domestic product growth than the national average in the years that followed.
Kansas remains a prominent example. The Center’s analysis said Kansas lawmakers later reversed major portions of the state’s 2010s tax cuts after the policy created budget pressures and did not produce the anticipated gains.
Migration claims also require context, Tharpe said. About 1.5% of people move between states in a given year, and more than two-thirds of those movers identify jobs or family as their primary reason. Taxes can matter, particularly for higher-income households, but they are one consideration among many, he said.
Distributional and fiscal questions
Tharpe said shifting revenue toward sales taxes would have placed a larger share of the cost of public services on lower- and middle-income households, which generally spend more of their income on taxable goods and services. Higher-income households are more likely to save or invest a portion of theirs.
Missouri’s individual income tax supplies about 62% of the state’s general revenue, and sales taxes about 24%, according to the Center. Replacing the income tax would therefore have required substantial rate increases, a much broader base, spending reductions, or some combination.
The analysis estimated that if lawmakers had fully offset lost income tax revenue through higher sales taxes, as many as four in five households could have faced an overall tax increase; the lowest-income 20% would have paid 3.4% more of their income on average, while the top 1% would have received an average 2% reduction. It also estimated the combined state and local sales tax rate could have approached 20% without a base expansion.
Separately, Missouri State Auditor Scott Fitzpatrick’s June report projected the General Revenue Fund could be exhausted early in fiscal year 2028; it did not forecast Amendment 5’s effects. Tharpe said the amendment could have complicated future budget decisions by directing revenue growth toward continued income tax reductions. “[S]tate tax policy and revenue policy, like so many things, is really about choice,” he said.
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